Questions asked over crowdfunding

Awkward status

But the groundbreaking law does not apply to crowdfunding, as it differs greatly from fundraising projects by charities, which aim at the welfare of a group, rather than one or a few specific individuals.

Regulations introduced in 2017 by the ministry stipulated that platforms' duties go no further than alerting donors to the risk of fraud, and that those seeking donations should be held accountable for posting misleading information.

This means that crowdfunding is exempt from scrutiny under the newly enacted law that stresses transparency, which is crucial to combating embezzlement.

Experts said the rules on charities are extremely complex, and if applied to crowdfunding platforms that handle millions of requests for help, they could dramatically increase the time required and the cost, deterring people from seeking help in an emergency.

He Guoke, a lawyer with the Beijing Zhicheng Law Firm who specializes in charity-related disputes, said that under the current rules most platforms do what they are legally obliged to do.

"Codes of conduct for such platforms have been drawn up to encourage better oversight, but they lack legal force," he said.

To step up supervision of the sector, He said it is necessary to consider revising the charity rules in light of crowdfunding because of its "strong public nature".

Gui Yiwei, a lawyer with the Shanghai Alshine Law Firm who focuses on contract law, said crowdfunding platforms resemble information service providers, and are legally accountable for any misleading information posted on them.

"Publishing fake or illegal information could amount to an act of infringement and be punishable by law," he said.

Li Yinglu, a legal consultant with a private foundation, suggested more focus be placed on regulations covering online platforms, as problems stemming from crowdfunding "are shared by a number of internet-based companies".

"The internet, known for its speed and wide coverage, could magnify the impact of wrongdoing. Further revisions should (be made) to allow online platforms to take on more responsibility for what they publish," she said.

Huang Ximing, a researcher at the China Philanthropy Research Institute, said self-discipline within the sector also matters. "Laws are always the bottom lines. There's great room for platforms themselves to find out what their duties are," she said

Last year, major platforms signed a self-discipline agreement in an effort to improve transparency and verification of information.

This led to improvements that included the introduction of a system to report scams, along with a "wrongdoers' blacklist".

In a written response to a request for comment, the Ministry of Civil Affairs said it plans to guide revisions to the self-discipline agreement.