Online crowdfunding has emerged as a new fund-raising channel for China's cash-strapped small companies and startups amid a slowing economy.

Crowdfunding, or a large number of individuals providing starting capital in small bits each online to a new company, has been backed by China's top leadership.

Premier Li Keqiang said recently that the government will encourage the new financing channel to help fund small businesses that appear set to boom in the country.

"New ideas like crowdsourcing will be promoted to bring more social forces into play," Li said at a recent meeting of top leaders on education, science and technology.

The number of online crowdfunding platforms in China has recently ballooned. As of September, there were 234 crowdfunding platforms and regions operating in 21 provinces across China, according to a report by Web portal Wangdaizhijia.com, which tracks the online financing industry.

In 2014, the four largest crowdfunding platforms, including anglecrunch.com, the country's first crowdfunding website, settled 3,091 financing deals, raising 1.03 billion yuan ($160 million).

The World Bank had forecast that the global market value of crowdfunding will reach $300 billion by 2025. China will take about one-sixth of the global market share.

The rapid growth of crowdfunding has drawn the attention of China's securities regulator, which is drafting rules to better regulate the channel and eradicate illegal financing.

In August, the China Securities Regulatory Commission clarified the definition of crowdfunding, stressing that funds raised through crowdfunding platform must be in small amounts and that the process should be open and public.

The regulator said no entities can illegally sell shares to the public in the disguise of crowdfunding, which is different from private equity investment.

The number of investors has been capped at 200 for private equity placement. Public share offerings to more than 200 investors are subject to regulatory approval .

Meanwhile, the $5-trillion stock-market summer rout has made online crowdfunding increasingly the preferred route for smaller companies seeking capital.

Alan Li, chief executive of United Photovoltaics Group Ltd, a Chinese solar power panel farm operator, was quoted by Bloomberg as saying that the May-September stock-market woes have affected the ability of many companies to raise funds.

United PV is joining Chinese companies, including the Internet investment platform Solarbao.com, in crowdsourcing funds for solar projects, broadening the industry's sources of financing.

The company raised 10 million yuan last year for a 1-megawatt solar power plant in the southern city of Shenzhen, which was the first crowdfunding in China for the industry, according to a Bloomberg report.

Nick Duan, a Beijing-based analyst from Bloomberg New Energy Finance, said: "Individual investors are interested in Internet-based wealth products due to limited investment choices, making crowdsourcing a likely source of funding."