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Monday 10 December 2018
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Crowdfunding in China vs India

Crowdfunding India isn’t the only country that is rapidly taking to the online fundraising world. China too, is slowly developing their crowdfunding spaces to make funds more accessible for businesses, startups, nonprofits, social enterprises, and individuals. In fact, smartphone giant from China, Xiaomi, recently announced that they will be bringing their crowdfunding platform to India, for a range of products that will be manufactured and sent to customers only after the sales target is met. If not, the money will be returned to customers. India is the only country, aside from China itself, that Xiaomi will bring it’s crowdfunding platform to. This shows that the Indian and Chinese population is widely accepting this unconventional way to raising money, both, on the campaigners and donors end.

One of the key differences in the crowdfunding scheme adopted by the two countries is the type of crowdfunding that is gaining popularity. China boasts one of the largest equity crowdfunding markets, while in the crowdfunding India world, equity crowdfunding is considered illegal, but donations based crowdfunding is booming. While the SEBI is analyzing and reviewing the possibilities of equity crowdfunding in India, it’s primary concern is that of high risks to large number of investors.

As a matter of fact, there are very few rules and regulations that govern the equity crowdfunding market in China, and a result, investors are at high risk of running losses. One of the major concerns is fraud and money laundering that could take place, causing large amounts of losses to investors. Another concern is that equity crowdfunding investors won’t have the same involvement in the working of a company. Meaning they won’t have face-to face communications, and would have to rely only on information presented to them digitally. Second to equity crowdfunding in China, is rewards-based crowdfunding, where contributors will receive a reward in exchange for their funds. Xiaomi’s announcement shows that rewards based crowdfunding is really taking off in both India and China. Moreover, they have been incredibly successful in creating a buzz around the brand, which is one of the many other advantages of raising capital online. That said, the crowdfunding market in China, just like India, is still in its nascent phases, with a lot of structural development in the works.

One of the biggest driving factors that encourage a crowdfunding India, and in fact even crowdfunding in China, is the sheer number of internet and smartphone users we have. It not remains to be seen how these two countries catch up with the crowdfunding giants of the west, USA and UK. Given that both countries have been quick to accept donations and rewards based crowdfunding, much relies on the development of structures, rules, and regulations that will govern equity and debt based crowdfunding. With that in place, it can really change the landscape of business and entrepreneurship in the two countries.




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