The regulation of illegal fundraising in China

Abstract

ABSTRACTThe rise of financial technology means that it is easier than ever to raise funds from a large group of people, notably via peer-to-peer lending or crowdfunding platforms. This article seeks to discuss the law on illegal fundraising, which has existed for some time before the boom of the Internet, as a legal response to the increasing number of fundraising from the public. Regulation is necessary to ensure market order and investor protection. Virtually in all markets, there are restrictions on how entities can make a public offer of shares, bonds and/or other investment schemes. There are several laws, most notably criminal law, in China that are relevant to illegal fundraising. An individual/company can potentially breach one or more of these rules as long as they attempt to raise funds from a non-conventional (i.e. not stock markets or banks) route. The worst outcome of this used to be death penalty. There has been a degree of ambiguities in the application of these laws. The article will attempt to clarify these ambiguities. The regulation of illegal fundraising can have a far reaching consequence on the financial markets in China, considering that non-state entities, particularly small and medium-sized enterprises, have limited access to conventional finance. The article will consider whether China is on the right track in terms of regulation to allow alternative fundraising channels to thrive. This article is the first ever to present a holistic account of the regulation of illegal fundraising in China.