Five-fold rise in crowdfunding after call to boost start-ups

Screenshot of Jingdong crowdfunding shows the homepage of the website. [Photo/chinadaily.com.cn]

Start-up businesses raised more than 11.42 billion yuan ($1.7 billion) through crowdfunding in China last year, according to Internet finance service provider Wangdaizhijia.

Crowdfunding allows people to raise money for projects online in return for giving investors business stakes, products or services.

The sum raised through crowdfunding in 2015 was more than five times as much as the 2.16 billion yuan raised in 2014, following authorities' encouragement of mass entrepreneurship to counter a slowdown in growth and aid economic restructuring.

The number of crowdfunding platforms almost doubled to 283 last year, according to Wangdaizhijia.

In addition to crowdfunding, venture capitalists and private equity firms have been driving the boom in start-up funding.

Early stage funding can be risky, warned Wangdaizhijia. Forty crowdfunding platforms were shut down in 2015 while another 26 shifted to other businesses, it said

Some of the platforms were also vulnerable to fraud, leading to financial losses for investors.

In response, the China Securities Regulatory Commission has issued guidelines to regulate crowdfunding. It banned crowdfunding in the form of equity financing without approval from regulators.