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crowdfunding in China

Of all the FinTech innovations, it is perhaps crowdfunding that is of the greatest importance to SMEs and startups worldwide, and it's certainly the service that's generating the most buzz in tech-focused commercial circles.

Emerging just over a decade ago in the USA and Europe (Indiegogo 2008; Kickstarter 2009), it fast gained popularity within Southeast Asia, notably in Singapore, which is starting to assume hub status - both regionally and globally.

However, the greatest single economic market in Asia is of course China, with the strongest potential to make or break the concept, but the country's particular history and culture means that crowdfunding development faces several specific challenges in comparison with other crowdfunding arenas.

Indiegogo China

To support product creators in China, Indiegogo launched a China Global Fast Track Program in 2018.

Crowdfunding in China: Challenges

Although the basic concept and value of crowdfunding has been widely proven elsewhere, there remain stresses within Chinese business culture which have initially slowed crowdfunding's development.

1. Weak Intellectual Property Rights 

China's lax enforcement of copyright and patent laws - in so much as they exist at all - means that would-be crowdfunders risk having their ideas duplicated as soon as the product hits the market, or even before with one stand out case the fidget spinner.

This can dissuade small startups from investing in innovation without the backing of a more powerful ally.

With crowdfunding, this problem is made even worse because of the open nature of the financing model: making an idea public as part of the funding campaign risks plagiarism before it's even passed the conceptual stage, see fidget spinner and others.

2. The Problem of 'Face'

The concept of 'face', or social dignity and standing, is vital within Chinese society, no more so than in business circles.

There remains a significant stigma in failing in a commercial enterprise, as opposed to an admiration for the bravery of risk-taking.

With traditional funding, any loss of face can be contained within a small circle of trusted investors.

In contrast, with crowdfunding the whole process is more public, and therefore less attractive to those with a strong aversion to risk's possible consequences.

3. Regulatory Challenges

Lastly, while the modern Chinese economy is largely market-driven, it still operates with a somewhat heavy regulatory touch compared to western or Southeast Asian competitors. Current and future legalities can often be murky.

Platforms need to navigate complex waters to stay within what's sometimes an unclear regulatory framework, while both investors and initiators can find their interests are poorly protected. Caveat emptor.

These concerns have stunted the growth of crowdfunding within the domestic Chinese market, but there is clearly an appetite for Chinese investment in overseas FinTech ventures, particularly in the USA where the established platforms have been the focus for huge sums in Chinese backing.

Add to this the government's ongoing push to build on the economy's existing manufacturing strength by developing the knowledge and innovation sectors, and it's clear that the opportunities for startups and SMEs within China are considerable.

If crowdfunding can overcome these obstacles and bridge the funding gap, its use stands to skyrocket.

The Future of China Crowdfunding 2020 and Beyond

Thankfully for Chinese entrepreneurs, the future is exceedingly hopeful.

Existing international platforms firmed up their presence in the country, while a recent major domestic launch could provide the impetus needed to firmly establish crowdfunding within the commercial culture.

As crowdfunding continues to secure a stronger foothold, the challenges will be more easily overcome, and growth can be expected to develop its own momentum as distribution channels post-crowdfunding expand.

China's major player is JD.com, owned by the Jingdong Group, which has launched a crowdfunding platform with close to half a billion US dollars of venture capital when it began. With Jingdong Group being the largest ecommerce operation in China, their backing represents a strong vote of confidence in the future of Chinese crowdfunding.

Commentators also expect that Jingdong Group will continue to use its immense retail strength and influence to transition the platform away from a pure fundraising operation, and toward providing a marketplace for SME and startup products where funding, promotion, and fulfillment can be combined - obviously an enticing prospect given the size of the Chinese market Jingdong already have leading access to.

The platform boasts a US$1bn-strong financing fund applied to startups, strictly within the Chinese market at this point, displaying a rate of growth reached in a fraction of the time it took established players such as Kickstarter to achieve.

Will China Boost Overall SE Asia Crowdfunding? 

The sheer size and economic power of China means it needs to be taken seriously in any sector it turns its attention to.

Although it was initially slow to start, the Chinese crowdfunding industry could soon be one of the defining players in the space and the wider FinTech industry, with the potential to boost activity across the entire Southeast Asia region in its wake. 

Doing a Product Based Crowdfunding Campaign?: Make Shipping Easy on Yourself with the Help of Fulfillment Bridge

Once you have your backers excited and crowdfunding sales will start to climb. Prepare to keep your customers happy and yourself sane by taking advantage of the full suite of Fulfillment Bridge Crowdfunding Fulfillment solutions.

When you are ready to take your crowdfunding shipping and fulfillment to the next level, contact Fulfillment Bridge

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