(Yicai Global) Oct. 12 -- Chinese e-commerce giant JD.Com's product crowdfunding platform has ceased operation, but ongoing fundraisers are allowed to proceed.

Coufenzi was shut down on Oct. 10, while its dedicated website was closed on Sept. 30, The Paper reported yesterday, citing a notice recently circulating online.

Crowdfunding is a way of raising money to finance projects by collecting money from people online. Crowdfunding initiators will receive the funds, and benefactors will get a reward according to the amount of their donations once the preset target is reached. Kickstarter, GoFundMe, and Indiegogo are the most popular crowdfunding platforms abroad.

For JD.Com, the crowdfunding business has huge risks, so closing an entire business line makes sense, said Pan Helin, co-chair of the digital economy and financial innovation research center at Zhejiang University's International Business School.

Launched in July 2014, Coufenzi was one of JD Finance's nine businesses but was later moved under JD.Com's retail division, which is mainly responsible for new product promotions and trials. PowerEgg drone, the first domestic product to raise over CNY100 million (USD14 million) via crowdfunding, was listed on Coufenzi. The platform's turnover in the first half of 2015 accounted for 56 percent of the total products crowdfunding market.

In China, crowdfunding is more like a kind of marketing, much closer to presales at discounted prices, as products listed on crowdfunding platforms are usually available to the initiator at a much lower cost than retail prices.

Crowdfunding has been quite controversial in China, as many believe there are issues with this practice, such as bogus motives and defraud, Pan noted.

There were 532 crowdfunding platforms in China in 2016, the peak year. But from the following year, the number began to drop to 105 as of the end of June 2019.

Suning.Com also shut down the crowdfunding business the electrical appliance retailer launched in April 2015, according to executives at the firm. The crowdfunding platforms of e-commerce giant Alibaba and smartphone maker Xiaomi are still operational. Video site Bilibili entered the crowdfunding sector about two years ago.

Editor: Futura Costaglione