When pooling capital for a business, solicit only known relatives, friends, and employees face-to-face: never advertise publicly on social media or allow friends to solicit strangers

Borrowing money or pooling capital privately from friends, relatives, and internal employees is not illegal. What crosses into criminal territory is publicly soliciting unvetted strangers while promising guaranteed principal repayment, fixed interest, or guaranteed investment yields. Collecting 1 million RMB or taking money from 150 people triggers criminal prosecution starting at up to 3 years' imprisonment. If funds were channeled into legitimate business operations and fully refunded prior to indictment, criminal penalties may be exempted.

Zero monetary cost. When borrowing operational funds or soliciting equity partners, negotiate in person one-on-one exclusively with existing relatives, friends, and regular employees. Never post solicitations on WeChat Moments, group chats, flyers, or public investment pitch events. If a friend offers to "ask around and bring in outside investors," stop them immediately. The difficulty is resisting the temptation to rapidly pool outside money when facing cash shortages.

Article 176 of the Criminal Law governs the crime of illegally absorbing public deposits or absorbing public deposits in disguised form. Penalties include up to 3 years' imprisonment or criminal detention, plus fines; for large sums or serious circumstances, 3 to 10 years; for especially large sums, 10+ years. The Supreme People's Court judicial interpretation sets four concurrent criteria: (1) raising funds without statutory approval from financial regulators or under the guise of legitimate business; (2) publicly advertising through internet platforms, media, investment pitches, flyers, or text broadcasts; (3) promising repayment of principal and interest or investment returns within a set timeframe in cash, physical goods, or equity; and (4) soliciting funds from non-specific members of the general public. Crucially, the interpretation affirms: "Absorbing funds from specific targets among relatives, friends, or internal personnel without public promotion does not constitute illegal absorption of public deposits." However, joint guidance from the SPC, SPP, and MPS identifies two exceptions that still count as soliciting the public: (a) collecting funds from relatives or employees while knowing and permitting them to solicit outside strangers; and (b) hiring outside strangers as nominal employees specifically to collect funds from them. Criminal conviction thresholds require satisfying any one of three metrics: raising >=1 million RMB, soliciting >=150 people, or causing direct investor losses >=500,000 RMB. Thresholds of >=5 million RMB, >=500 people, or >=2.5 million RMB in losses trigger the 3-to-10-year sentencing tier. Total absorbed funds are counted in gross. If funds were primarily invested in legitimate production/business activities and all collected monies are refunded prior to prosecution, criminal penalties can be exempted; significantly minor offenses with negligible harm are not prosecuted criminally. Administratively, local illegal fundraising taskforces impose administrative fines between 20% and 100% of collected funds, and corporate legal representatives face warnings and personal fines between 500,000 and 5 million RMB.

If a project is designated as illegal fundraising, contributing friends and relatives also suffer losses: Article 25 of the Regulations explicitly mandates that losses incurred by participating in illegal fundraising are borne personally by contributors. Article 19 specifically targets a common commercial retail trap: selling goods, prepaid service packages, or project stakes coupled with promises of cash buybacks, equity dividends, or material returns. Selling prepaid VIP cards or store membership cards with promised yield distributions to walk-in customers falls directly under this statutory restriction. Prudent capital avenues involve securing commercial bank credit or properly allocating equity under written partnership agreements (see Chapter 12, Rule 28). For investors avoiding ponzi schemes and high-yield traps, see Chapter 5, Rule 6. For protecting elderly family members against senior care investment traps, see Chapter 17, Rule 5. The primary beneficiary is yourself; secondary beneficiaries are lending relatives and friends.

全国人大常委会 (2020). 刑法修正案（十一）（第十二项，即刑法第一百七十六条）. https://www.spp.gov.cn/zdgz/202012/t20201227_503682.shtml；最高人民法院 (2022 修正). 关于审理非法集资刑事案件具体应用法律若干问题的解释（法释〔2022〕5 号修正，第一、三、四、六条）. https://www.court.gov.cn/fabu/xiangqing/346901.html；最高人民法院、最高人民检察院、公安部 (2014). 关于办理非法集资刑事案件适用法律若干问题的意见（第二、三点）. https://www.spp.gov.cn/zdgz/201404/t20140401_70180.shtml；国务院 (2021). 防范和处置非法集资条例（国务院令第 737 号，第二、十九、二十五、三十条）. https://www.gov.cn/zhengce/zhengceku/2021-02/10/content_5586632.htm