STRINGER / REUTERS Mobike bicycles in Shenzhen, China, August 2017.

China's Booming Sharing Economy

Why a Bust May Be Near

Tucked away in the corner of a busy shopping mall in Wangjing, a district in northeast Beijing, black-and-orange compartments entice passersby with a colorful pitch. “Only 1 yuan for 12 hours!” reads one bright poster. The metal boxes, which look much like vending machines, contain umbrellas; to unlock an umbrella, customers scan a QR code with their smartphone and pay an hourly rate plus a small deposit through Alipay or WeChat Pay—two popular Chinese mobile payment apps. These “brollies” are only one recent addition to China’s red-hot sharing economy, which was worth $520 billion in 2016—a 103 percent year-on-year increase. But despite the charm and utility of shareable umbrellas, bicycles, and even basketballs, there are many warning signs that China’s sharing economy has reached peak growth and that the coming months will see a wave of bankruptcies and consolidations as many start-ups built on unsustainable models fold.

China’s sharing economy is nascent but already impressive in scope. China already boasts 12 unicorns—private firms valued at $1 billion or more—in the sharing space, more than any other nation. These include world-beaters such as Didi Chuxing, which bought Uber’s China division in August 2016 after a protracted battle between the two firms, and is now the world’s largest ride-hailing company. Newer Chinese unicorns include Mobike and Ofo, two bike-sharing firms out of Beijing that innovated on a familiar model by allowing customers to park their bikes anywhere, in contrast to the more limited, dock-based systems dominant in the United States and Europe. Two years ago, there were barely any shareable bikes in Chinese cities. Today, there are over 16 million.

The rapid development of China’s sharing economy has been spurred by technological and social trends, supported in turn by explicit government backing. To begin with, China has nearly 700 million smartphone users and mobile payment apps are ubiquitous: two-thirds of smartphone users regularly utilize Alipay and WeChat Pay. In 2016, Chinese mobile transactions totaled $5.5 trillion, 50 times more than in the United States. The popularity urbanization, fosters a consumer environment that is conducive to shareable bikes, balls, and umbrellas. Moreover, the high cost of living in first-tier cities such as Beijing and Shanghai may promote a “spirit of frugality,” in the words of one industry analyst.

Loading, please wait...

Browse Related Articles on {{search_model.selectedTerm.name}}

{{indexVM.results.hits.total | number}} Articles Found

  • {{bucket.key_as_string}}