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China
will promote greater use of equity crowdfunding for startups to encourage
entrepreneurship in the world's second-largest economy, a cabinet document said
on Saturday.
China's
leaders have repeatedly said they want to promote more entrepreneurial activity
in the state-dominated economy to stimulate employment, a top priority as the
economy slows.
While
they have pledged strong support for online business, however, they have until
now generally refrained from showing enthusiastic support for crowdfunding.
A
State Council document posted on the government's website called for expanding
equity crowdfunding projects to help small companies raise funds as a
"useful complement" to traditional equity financing while underlining
the need to protect investors' rights and minimise financial risks.
With
most Chinese banks unwilling to fund startups, crowdfunding has already seen
rapid growth, helped by new platforms set up by e-commerce giants such as
JD.com.
Crowdfunding
is also being used by large companies as funds from traditional channels dry
up. Dalian Wanda Group, China's largest commercial property developer, said in
June that it raised 5 billion yuan (US$784 million) from investors online and
that it would continue to raise money from the public.
But
reports have highlighted some of the risks of the unregulated market. A Beijing
court earlier this month ordered a restaurant in the capital to pay a fine of
15,000 yuan for deceiving public investors about its intended use for 700,000
yuan raised online, according to a local media report.
The
cabinet document give no details about how to address risks but promised that
the government would grant easier market access to startups by cutting red
tape.
It
also called for the development of third-party credit rating services and a
standardised system for collecting, evaluating and sharing credit information.
China's
securities regulator said last month that it would soon begin inspecting online
equity financing platforms to address risks from illegal activities in online
equity financing platforms.
Under
draft rules drawn up by the Securities Association last year, equity
crowdfunding projects must have no more than 200 investors. Investors must have
at least 3 million yuan in financial assets or 500,000 yuan in annual average
income for the previous three years.
China
could account for half of the developing world's crowdfunding by 2025, or US$50
billion, according to a World Bank forecast.
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