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China UK Equity Crowdfunding Regulatory and Market Comparison Study

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China UK Equity Crowdfunding Regulatory and Market Comparison Study — China UK Equity Crowdfunding Regulatory and Market Comparison Study June 2017 — 1. EXECUTIVE SUMMARY ......................................................................................................................................................................................................... 4 TRENDS WITHIN THE UK MARKET .................................................................................................................................................................................................... 4 TRENDS WITHIN THE CHINESE MARKET ............................................................................................................................................................................................ 4 UK REGULATION AND POLICY ......................................................................................................................................................................................................... 5 CHINESE REGULATION AND POLICY ................................................................................................................................................................................................. 5 UK PLATFORMS’ PERSPECTIVE ON THE CHINESE MARKET ................................................................................................................................................................. 6 CHINESE PLATFORMS PERSPECTIVE ON THE UK MARKET .................................................................................................................................................................. 6 2. INTRODUCTION ..................................................................................................................................................................................................................... 7 METHODOLOGY ............................................................................................................................................................................................................................. 7 CHINA AND THE UK’S ‘GOLDEN ERA’ ............................................................................................................................................................................................... 7 DEFINING EQUITY CROWDFUNDING ................................................................................................................................................................................................. 8 3. UNDERSTANDING UK EQUITY CROWDFUNDING ........................................................................................................................................................... 10 SIZE, GROWTH AND PERFORMANCE OF THE UK MARKET ..................................................................................................................................................... 10 UK MARKET TRENDS ....................................................................................................................................................................................................... 12 UK CROSS-BORDER ACTIVITY ........................................................................................................................................................................................... 13 CASE-STUDIES AND BUSINESS MODELS IN THE UK MARKET ................................................................................................................................................ 14 THE HISTORY AND DEVELOPMENT OF THE UK EQUITY CROWDFUNDING MARKET ................................................................................................................ 17 REGULATION OF UK EQUITY CROWDFUNDING ................................................................................................................................................................... 19 2016/17 FCA REGULATORY REVIEW ................................................................................................................................................................................ 21 UK POLICES RELATED TO THE EQUITY CROWDFUNDING MARKET ....................................................................................................................................... 23 UK CROWDFUNDING ASSOCIATION (UKCFA) .................................................................................................................................................................... 25 4. UNDERSTANDING CHINESE EQUITY CROWDFUNDING ................................................................................................................................................ 26 DEFINING CHINESE EQUITY CROWDFUNDING ..................................................................................................................................................................... 26 SIZE AND GROWTH OF THE CHINESE MARKET .................................................................................................................................................................... 28 CHINESE MARKET TRENDS ............................................................................................................................................................................................... 29 CHINESE CROSS-BORDER ACTIVITY ................................................................................................................................................................................... 32 CASE-STUDIES AND BUSINESS MODELS IN THE CHINESE MARKET ........................................................................................................................................ 33 THE HISTORY AND DEVELOPMENT OF THE CHINESE EQUITY CROWDFUNDING MARKET ........................................................................................................ 36 REGULATION OF CHINESE EQUITY CROWDFUNDING ........................................................................................................................................................... 37 2 REGULATORY REVIEW IN CHINA ........................................................................................................................................................................................ 39 CHINESE POLICES RELATED TO THE EQUITY CROWDFUNDING MARKET ............................................................................................................................... 42 NATIONAL INTERNET FINANCE ASSOCIATION OF CHINA (NIFA) ........................................................................................................................................... 44 5. CHINA UK CROSS-BORDER INVESTMENT REGULATIONS PRIMER ............................................................................................................................ 45 6. UK PERSPECTIVE ON THE CHINESE MARKET ............................................................................................................................................................... 50 7. CHINESE PERSPECTIVE ON THE UK MARKET ............................................................................................................................................................... 53 8. APPENDICES ....................................................................................................................................................................................................................... 56 APPENDIX - OVERVIEW OF INTERNATIONAL REGULATION OF EQUITY CROWDFUNDING ....................................................................................................................... 56 APPENDIX: UK STAKEHOLDERS .................................................................................................................................................................................................... 59 APPENDIX: CHINESE STAKEHOLDERS ........................................................................................................................................................................................... 60 APPENDIX – ABBREVIATIONS ........................................................................................................................................................................................................ 62 3 — 1. Executive summary Trends Within the UK market - The UK Equity CroWdfunding market has experienced rapid groWth over the last 3 years. The amount invested through equity crowdfunding has grown from £28 Million in 2013 to £332 Million in 2015 and the number of deals increasing from 175 in 2013 to 720 in 2015. - Data on 2016 performance indicates a sloW-down in deals and volume in Q1 & Q2. This is in line With the rest of the investment market. - While the model is used to invest in companies across a range of sectors, the most popular sector for equity-based croWdfunding is property, folloWed by technology; food & drink; internet and E-Commerce; media and publishing. - Equity croWdfunding made up 16.5% of the UK market for seed and venture stage investment in 2015. Recent figures suggest that it has grown to 21% in 2016.1 Trends Within the Chinese market - A savings ratio of 30% (compared to 5.60% in the UK) and central bank base rates beloW the rate of consumer price inflation have combined to create huge demand for alternative investment products in China. - From a base of 32 platforms that raised
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