China’s Sharing Economy- A Clever Solution or a Troublesome Bubble

As China’s sharing economy becomes increasingly heated, some express concern in the likelihood of a bubble.

By: Buyi Wang

It’s a typical day for Mrs Feng, a middle-class Chinese person living in Beijing. Tired after work, she finds a public bike and rides home for 1 cent(USD). Looking forward to some entertainment, she rents a public basketball at a price of 50 cents per hour and gets her head in the game. Nevertheless, she soon gets an invitation for mini-karaoke. Through Chinese Uber, she gets to the nearest department store and finds a mini-karaoke bar, a small room with two seats and one screen. Located in the public area of the mall, the bar is easily accessed by everyone and every song costs only 80 cents.

Mrs Feng is one of the billion Chinese people that enjoys such a lifestyle. The idea of resources shared and thus enjoyed by all is welcomed with great enthusiasm in China. From bicycles to automobiles, from umbrellas to sleeping bunks, everything is labeled as “shared”. According to Li, “people joke that the time has come when you can share almost everything except your children and wife” (2017).

The appearance of such trend in China is not a mystery. Chinese metropolis are well-known for their large population, which puts a huge pressure on public resources. People stand shoulder to shoulder on subways. Roads on work-days are compared to parking lots. Apart from this, high living costs discourage private ownership. Take automobiles as examples. To purchase one, you need more than wealth. Obtaining a car starts with winning a car plate through the government lottery system, which was a system created in response to the growing number of cars on the streets. Unfortunately, according to Lu, “the success rate is currently lower than 1 percent” (2016). Another way of obtaining local car plates are through auctions, where they are sold at prices of more than 84,000 yuan (US$12,704). Not to mention that the government plans to charge congestion fees in the future. Together, the scarcity of public resources and the rocket-high cost of private ownership gave birth to services such as Uber, public bikes and so on.

Sharing services benefit people with cheaper substitutes to many things, and consumers are not the only beneficiaries. Companies are gaining wealth and valuable customer information at every minute. According to Ming, “last year, China’s sharing economy transactions were worth more than $500 billion……meanwhile, 600 million people were involved in activities related to that sharing economy, which could grow to account for 10 percent of China’s GDP by 2020” (2017). Apart from wealth, companies obtain datas such as the age of bike-renters and song-choices of the mini-karaoke goers, at a low cost, since the sharing service is cheap. They help the companies better analyze the market and create future plans. For example, after the company knows which artist is the most welcomed, it can add more songs of this specific artist to the karaoke machine, making the karaoke bar more popular.

However, every coin has two sides. Recently in Chengdu(a city in the Southwest), an angry pedestrian blocked the street with public bikes, complaining that they have taken too much space on the sidewalks. Walking on the street of many Chinese cities, one really marvels at how many and how new some public bikes are(which means they have not been used at all). The newly created sleeping bunks have also raised controversies. Aimed at tired shoppers in the department store, sleeping bunks have been shut down by the government. It’s said that in case of fire, it’s hard for customers to climb out of them. Together with “sharing sleeping bunks”, “sharing tissues” and “sharing umbrellas” are also denounced as the “ridiculous and meaningless” derivatives of the sharing trend. With the trend growing more and more heated, some critics concern and suggest that the Chinese “sharing economy” is a bubble.

People who deny the existence of a bubble point out that the sharing economy is doing pretty well. According to Pennington, “in 2015, the sector (the sharing economy) was reportedly worth $229 billion and is predicted to grow by 40% annually over the coming five years” (2017). Having achieved domestic success, the Chinese “sharing companies” have also made headlines as they expand their services to foreign cities.  For instance, Didi Chuxing is the Uber of China. With 400 million domestic customers, it has also been making an effort to have a share in European and African markets. To people who carry a very positive attitude towards the sharing economy, it’s apparent that the trend is welcomed and recognized by the free market. Therefore, there’s no need to worry about a bubble. Nevertheless, people also need to acknowledge several failures that could serve as the alarm. According to Qin, Zhou Wei, the chief executive of XNode, a startup accelerator and co-working space in Shanghai, said that “we’re seeing a lot of money bouncing around and foolish investments [are] being made” (2017).  One of the so-called ‘foolish’ investments might point to this idea of sharing umbrellas, promoted by a company called Sharing E Umbrella. Critics of the idea states that the profit is trivial as the price of renting for an hour is below one dollar. At the same time, large amounts of umbrellas are never returned, bringing huge losses to the company. As predicted, Sharing E Umbrella becomes a public joke as it lost 30 thousands umbrellas within a short period of time. Another story of failure surrounds a public-bike company called Wukong. It started its business in Chongqing, a hillside city, whose up-and-down roads are a pain for bikers. Reflecting on all the arguments and market reactions to the new economic trend, one realizes that it’s hard to tell whether it’s a bubble or not. It doesn’t qualify as a bubble because it’s a response to what the society needs: a cheaper substitute when public resources are limited and private ownership is too costly. Nevertheless, it can go out of control if the society just blindly shares everything without thinking if it would work out or not.

Stepping back a little bit, we would be able to realize that behind all the “craziness” of sharing, China has a huge and ever-growing appetite for innovation and entrepreneurship. The extremely convenient electronic payment system used by the majority of Chinese citizens have accelerated the success of the “sharing economy”. By scanning a QR code, you are able to purchase everything from furnitures, to groceries, to street snacks within seconds. There’s no need to carry a wallet or credit cards. With the belief that advanced payment systems hold the key to China’s global success in the future, start-ups and tech-giants attempt to incorporate as much of those systems into their ideas.Therefore, the question that whether the Chinese sharing economy is a bubble really becomes whether China has a constant ability to produce valuable, new ideas that would generate profits and have the ability to expand globally.

This question is hard to answer now. However, our vision is for China to strive to catch up to its western counterparts in technology and innovation.. The sharing economy is only one angle that China has taken  so far. Even though it has received some criticism, it’s a pretty good solution to its scarce public resources and climbing living costs.

 

Works Cited

Lu, A. (2016, 27 Jun). Owning a car in China is getting harder and harder. Shanghai Daily. Retrieved from

http://www.shanghaidaily.com/business/autotalk-special/Owning-a-car-in-China-is-getting-harder-and-hardershdaily.shtml

Li, R.(2017, 4 July). Is sharing basketball a reasonable idea. hear the view of four entrepreneurs. NetEase. Retrieved from

http://tech.163.com/17/0704/07/COG2AUE100098GRC.html

Ming, C.(2017, 19 July). From bikes to basketball: everything’s on loan in China’s sharing economy. CNBC. Retrieved from

https://www.cnbc.com/2017/07/18/from-bikes-to-basketballs-chinas-fast-growing-sharing-economy.html

Shared Bike [Digital image]. Retrieved from         

https://pixabay.com/en/the-little-yellow-car-shared-bike-2652215/

Pennington, J. (2017, 25 June). The numbers that make China the world’s largest sharing economy. World Economic Forum. Retrieved from

https://www.weforum.org/agenda/2017/06/china-sharing-economy-in-numbers/

Qin, A. (2017, 28 May). In China, umbrellas and basketballs join the sharing economy. The New York Times. Retrieved from

https://www.nytimes.com/2017/05/28/business/china-communal-sharing.html?_r=0