One Million Chinese Companies Ride the Crowdfunding Wave

Technology that makes investing in non-tradable securities easy isn’t a sure way to make money. In China, a million companies have used loose regulations on internet investing to fund risky ventures. This isn’t all bad, but there are drawbacks to investing in such opaque ventures.

In just one corner of the booming online finance sector, more than 5,700 firms are registered with the Association of Shanghai Internet Financial Industry, a quasigovernmental group, to match small lenders and borrowers.

Not every company is registered, and more than half of those that are have had repayment problems or been investigated by the police, according to the association.

In January and February, Chinese electronics maker Cosun Group failed to repay about $166 million in bonds sold through an online marketplace owned by Ant Financial Services Group. Ant is an affiliate of e-commerce giant Alibaba Group Holding Ltd. and is valued by some analysts at more than $70 billion.

Many of the investors used Ant’s highly popular Alipay online payment system. After at least 13,000 Ant customers were affected, Ant said it was working to get them repaid but has declined to comment since then. Cosun couldn’t be reached for comment.

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.