China to Launch Crackdown on Illegal Fundraising Activity at Start of May


The Chinese central government plans to launch a severe crackdown on unlicensed and illegal fundraising activity at the start of May.

The State Council recently issued the “Regulations on the Prevention and Disposal of Illegal Fundraising” (防范和处置非法集资条例), which is scheduled to come into effect on 1 May.

Analysts say the move heralds far stronger regulation of illegal fundraising activity by China’s financial authorities in the second half of 2021.

The Regulations highlight “upholding the principles of focusing on prevention, striking early and striking minor [malfeasance], comprehensive regulation and appropriate disposal.”

They also call for “striving to discover risk at the incipient phase, dissolving hazards while they’re still in a nascent state, and preventing small risk from evolving into major problems.”

According to the Chinese central bank’s official news publication the new Regulations will “set the definition of illegal fundraising, stipulate the legal liability of illegal fundraisers and those who assist in illegal fundraising, and set out provisions for multiple areas including principles, procedures and methods for the prevention and disposal of illegal funds.”

“Illegal fundraising” (非法集资) is defined under the Regulations as “conduct which is not lawfully licensed by the State Council’s financial regulatory authorities or which breaches the provisions of state financial regulations, that attracts funds from unspecified targets via promises of payments of principal and interest or the provision of other investment returns.”

Dong Ximiao (董希淼), chief researcher with MUCFC, said that heightened regulation over the past two years had still failed to quell illegal fundraising activity in China.

“At present, the development of China’s financial markets is not sufficiently mature, and there is still very large room for improvements to investor education – the average person’s financial understanding urgently awaits strengthening,” said Dong.

“Under these circumstances, pressure for the prevention and disposal of illegal fundraising activity remains considerable.”