China is by far the world’s largest contributor when it comes to funds raised through crowdfunding. In China, crowdfunding as a source of finance has emerged quickly and evolved with incredible speed. However, only recently a stronger focus on regulation has been implemented and several frauds have played out in the short time crowdfunding has existed as a viable source of alternative financing in China. Therefore, data on the crowdfunding market in China might be prone to larger insecurities compared to other markets.
In this article, we will provide an overview of the size of the Chinese crowdfunding market and how different crowdfunding models are contributing to the market. A common misunderstanding about crowdfunding is that it is all about the non-investment based crowdfunding models of donation and reward where funders do not expect to receive an economic return. This is not true in any regions of the world, and especially not in China where these models are close to non-existing in the market. Instead, the debt-based model is absolutely dominating with a market share of 99.7% with the equity-based model accounting for almost all the remaining 0.3%. Looking only at business funding, just over 1% came from equity-based crowdfunding models. If you want to learn more about the different types of crowdfunding, make sure you drop by this article about the four main types of crowdfunding.
The Market of Crowdfunding in China
Crowdfunding as a source of finance is still a recent phenomenon, and because of this few statistics are available about the market. The most comprehensive data has so far been collected by the Cambridge Centre for Alternative Finance (CCAF) with data reaching back to 2013. The data is collected by survey data, which means that the latest available data is from 2017.
At P2PMarketData we are collecting data continuously, so you can be certain, that our numbers are always up-to-date and valid. However, we still lack data from Chinese peer-to-peer platforms. As a result, the mapping of crowdfunding in China below will mainly draw on data from three rapports made by CCAF on alternative finance industry in the Asia-Pacific region. The latest rapport was published in 2018 and can be found here.
As mentioned above, it is worth noting that especially peer-to-peer lending in China has suffered many frauds and bankruptcies in recent years, so the number presented below could be attached with more insecurities than what we find in the European market and the American market. However, CCAF specifies that they have cross-checked misattributed volumes or anomalous figures through direct contact with the platforms and that they have used publicly available data and web scraping to calibrate the data.
If you are interested in other markets, you can find the volumes for American, British and European platforms by visiting our data-section.
Crowdfunding Models in China
In the Asia-Pacific region, China accounted for 99% of the crowdfunding volume in 2017. The entire Asia-Pacific region raised $361.9 billion through crowdfunding, and of these China was responsible for $358.3 billion, which makes China the largest market for crowdfunding the world. This can be contributed especially to large volumes in peer-to-peer consumer lending and peer-to-peer business lending.
In 2017, activity was registered from only nine separate types of crowdfunding or alternative finance models. This stands in contrast to both the European market, the American market, and the rest of the Asia-Pacific region, where 12 models were captured (not counting the “Other” category used in Europe and America). Also, 12 models were registered for the Chinese market in 2016.
The nine models registered in China in 2017 were: Marketplace/P2P Consumer Lending (62.8% market share), Marketplace/P2P Business Lending (27.3% market share), Balance Sheet Consumer Lending (4.4% market share), Balance Sheet Business Lending (1.9% market share), Marketplace/P2P Property Lending (1.7% market share), Invoice Trading (1.6% market share), Revenue/Profit Sharing Crowdfunding (0.3% market share), Equity-based Crowdfunding (0.1% market share), and Reward-based Crowdfunding (just above 0% market share).
Below you will find an illustration of the development in both the total market and the different crowdfunding models in China from 2013 to 2017. Please notice that we are using rounded numbers.
Looking at the numbers for 2017, we find that the overall market volume has increased by 46.9% compared to 2016. This is a slowing down in growth rate compared to the extraordinarily high growth rates of earlier years. To put this growth rate in context, the second-largest crowdfunding market in the world, the United States, had a growth rate of 23.9% in 2017 coming from a considerably lower funding volume ($42.7 billion). Also, we can see from the figure that the Chinese market is driven by particularly two models: Marketplace/P2P consumer lending and marketplace/P2P business lending. Together, these two models account for more than 90% of the overall market in China.
What is also interesting about the 2017 numbers is that marketplace/P2P consumer lending and marketplace/P2P business lending seem to be consolidating their position as the top drivers of volume in China. When we inspect the growth rates of the individual models for 2017, we discover that five models had a positive growth rate meaning they increased their volume compared to 2016, while four models had negative growth rates. Here, marketplace/P2P consumer lending and marketplace/P2P business had growth rates of 64.4% and 68.6%, respectively, while balance sheet business lending, that was placed as number 3 in 2016, experienced a negative growth rate of -74.8% after extremely high growth rates in both 2015 and especially in 2016. This paved the way for balance sheet consumer lending, the only model with large enough volume that looks like it could be in a momentum that could potentially pose a threat to the two leading models in the terms of market share, but after emerging from out of (almost) nowhere in 2016 with a leap from #9 to #4, it looks like the growth rate has normalized a bit in 2017.
Further down the list, revenue/profit sharing crowdfunding increased an impressive 988.9%, but from very low volumes. Thus, the development is interesting, but it is too early to conclude on the substance behind this number. Invoice trading also experienced significant growth of 146.1% going from $2.28 billion in 2016 to $5.61 billion in 2017. Especially in the European crowdfunding market, invoice trading occupies a large market share, and it will be interesting to see if the same will happen in China if the invoice trading model can keep the momentum going forward. Again, it is important to keep in mind that in terms of volume Europe is a much smaller market compared to China.
China Against the World: The Largest Crowdfunding Market in the World
As mentioned above, China is by far the largest crowdfunding market in the world with a total funding volume of $358.3 billion in 2017. In comparison, $44.3 billion was raised via crowdfunding in the Americas region of which the US had a market share of 96.5% corresponding to $42.8 billion. The distance to the European region including the UK is even bigger as the whole region accounted for “only” €10.4 billion or approximately $11.8 billion. In Europe, 67.7% or €7.1 billion could be attributed to the UK.
Looking at the numbers, there is no doubt that China is the largest market for crowdfunding in world. However, the market has evolved with lightning speed, which has led to problems with lacking regulations (like in many other countries) and quite a few frauds have been revealed in the brief lifetime of a noteworthy existence of crowdfunding in China. It is, therefore, not unlikely that we will see a continued slowing down of growth rates, and maybe even an overall negative growth, when the 2018 and 2019 are published for the Chinese crowdfunding market. Here, especially marketplace/P2P consumer lending and marketplace/P2P business lending are prone to lose market share as these types of crowdfunding have been hit hard when it comes to both funding volumes and the number of existing platforms.