Is the sharing economy overvalued?
With the sharing economy becoming a trend across the world, its development in China is both promising and controversial. The sharing economy first made its mark in China in 2011; today it has entered what many consider its golden development period. Regarding the sharing economy as one of the core directions of new economy, this year's Government Work Report vowed to help its development. The sharing economy has penetrated into 10 major domestic sectors and more than 30 sub-sectors, including transportation, second-hand online transactions as well as peer-to-peer (or P2P) lending. In fact, in just a few years, sharing-economy companies worth $1 billion or more have emerged in China. But the sharing economy also faces challenges. For instance, once sharing-economy businesses become full-time vocations, will they deviate from their original goal of sharing and effectively using idle social resources? Striking the right balance between innovative supervision and encouraging development is another difficulty the sharing economy faces. The merger between the two top domestic ride-hailing service providers Didi and Uber, which were also the market leaders of the sharing economy, had to face not only an antitrust investigation but also has been subjected to specific regulations in specific areas. The P2P lending market calmed down only after the strictest P2P financial regulation was issued. Moreover, many sharing-economy startups are forced into homogeneous competition for the lack of efficient profit-making models. So, have the prospects of the sharing economy been overestimated? And how does one evaluate the value of the sharing economy and the revolution it may bring? The sharing economy has great potential. It is not only a business model, but also a new socio-economic operation model. Through "Internet Plus", the sharing economy tries to connect the idle social resources at low costs and an efficient manner. Against the background of the Chinese economy's new normal, the sharing economy aims to activate idle resources and use them to the maximum advantage. The development of the sharing economy will not only create new jobs and provide income for more people, but also help build a new growth pole for consumption. Hence, the sharing economy is expected to become a new engine of economic growth. In 2013, the sharing economy accounted for 1.3 percent of the United Kingdom's GDP, and the country is taking measures to increase the proportion to 15 percent in five years. In China, although the scale of the sharing economy has exceeded 1 trillion yuan ($144 billion), it still accounts for a small proportion of the country's GDP, which means it still has enormous developing space. Given China's demographic dividends, the sharing economy has plenty of areas to explore. For instance, in 2015 the number of orders China's top ride-hailing service provider Didi reached 1.43 billion, more than the total number of orders Uber has received since it was founded. A broader development space for the sharing economy is sharing for enterprises and means of production, to cash in on the opportunities created by "Internet Plus" and the industrial upgrading in China. The power of the sharing economy is also evident in the changes it has effected in social operation models such as life and working styles, enterprises' organizations and cultural values. It allows individuals to engage in various fields to give full play to their talents and traditional enterprises to share talents and even turn into "virtual" enterprises. The sharing economy is also expected to reshape people's idea of ownership of materials and enhance trust and cooperation among individuals. To meet the challenges it faces and resolve its conflicts with traditional industries and existing systems, the sharing economy has to chart a novel path for itself while respecting the rule of law, which in turn will help it to fulfill its potential of building a connection between the old and new economic engines in China. The author is a senior researcher of Tencent Research Institute.
Sharing economy on the wheels of bicycles
"Sharing economy is not in the future but is happening now. It is not only happening in the developed countries but also is reshaping developing countries such as China," said Zhang Yanqi, cofounder of ofo, a Beijing-based bike-sharing startup, at the sideline of Chuangyebang 100 Future Leaders Summit on Thursday. From September 2015, when ofo delivered its first batch of yellow bicycles to university campuses to October 2016, when it delivered the first bicycle to larger communities in cities, the bike-sharing has become full-fledged part of sharing economy in China. "In the past, people bought houses or cars to make them their own property. But this concept of possession will change to sharing. It is very efficient from economic perspective," he said. Ofo is a platform that connects bicycle users. It encourages people to share their own bicycles to exchange the right of using every bicycle on the platform free of charge. Those who do not have a bicycle to share should pay to use them. Today, it connects 217,365 bicycles collected from common people or bicycle producers with more than 3 million registered users from 200 university campuses in 22 cities across China or communities in first-tier cities. "We will go to more cites," said Zhang Yanqi. "Ofo aims to connect all bicycles in the world." Unlike ofo, another ride-sharing platform Mobike produces special-designed bicycles for citizens to share. The original purpose for Mobike to share bikes is to save energy, space and time, said cofounder Hu Weiwei. Official data show that the commute coverage is less than 5 kilometers in 39 percent of car driving in Beijing in 2014. Five kilometers is a common distance for bicycle riding and walking. "When everyone has a car, 90 percent of the time cars are just parked, and rest of the time is spent in the middle of the road in traffic jam or wasted in looking for a space to park," said Hu, adding that a car's carbon emission is 18 times than that of a bicycle and needs 10 times more parking area. Bicycles makes traveling more efficient, and ride-sharing strengthens it. Hu showed that Mobikes are used 24 hours a day in Shenzhen, South China's Guangdong province, with a video during her speech at the summit. Hu said she was surprised about the around-the-clock use at first, until a Shenzhen Mobike user told her the reason. "Some workers, for instance, cleaners, get off or go to work early morning when public transport isn't operating. In the past, they may use their own bicycles, and now they use Mobike," she said. Sharing bicycles benefits all people living in the city. "Fifty-two percent of users are post-80s and nearly thirty percent post-90s. Also, there are foreigners from 110 countries registered on our platform," said Hu. Many people asked about the risk of bicycles being stolen. "A good system will breed goodwill," said Hu. "If everyone can get a bicycle anywhere anytime, no one will want to steal it." Authorities are backing these innovators. In December of last year, President Xi Jinping said that the government will support the sharing economy and internet-empowered innovations. "In less than one month of Mobike's launch in Guangzhou, the local government designated 39 Mobike parking areas across the city to support us," said Hu. "Shanghai government not only earmarked parking areas but also set up signs to teach people how to use Mobikes," she added.
Office realty joins sharing economy
These days, "Shanghai 189 Lane", Citic Capital's colorfully decorated and brightly illumined seven-story shopping complex in downtown Shanghai, sees an endless stream of young people entering and exiting, morning till late night. The year-end winter chill is no bar for them－but Christmas shopping isn't what they are here for. They are the city's entrepreneurs and self-employed professionals, out to view the floor plans of the top two stories of the complex. That's where lots of co-work spaces have been installed of late. Shanghai 189 Lane is one of the 200-odd co-work space sites that have mushroomed across the city. Zhang Yueqiang, a startup co-founder who is expecting to launch a visual reality content design outfit soon, said: "I've visited 18 sites in Shanghai in the last one week, and I'm thinking of moving into one of them at the beginning of 2017. Some are offering discounted rates at the year-end. But my co-founder said we should visit some more as there are plenty of choices now. "We need to choose the most cost-effective one, taking rental, location and services into consideration." Convenient, flexible, and affordable, co-work spaces have become the first choice of many startups, freelancers, independent players and self-employed professionals on the lookout for offices in Beijing and Shanghai. According to a research note by JLL, a real estate services provider, the number of co-work spaces in Beijing and Shanghai has jumped to over 500 from no more than 10 just five years ago. A research note from Shanghai-based Ruiyi Consultancy Ltd said the co-work space market by floor space grew 71 precent annually on average from 2007 to 2015, and is projected to grow 68 percent annually from 2016 to 2018. Companies from different fields such as real estate (UR Work, Soho 3Q), hospitality (Naked Hub which owns several resorts and hotel sites), and media (KrSpace) have entered the co-work space market and expanded quickly. That's not all. Foreign brands in this segment like WeWork from the US are trying to meet China's rising demand for co-work spaces. WeWork received $430 million in funding from China's Legend Holdings. The latter's private equity arm Hony Capital valued WeWork at more than $15 billion. WeWork has opened two co-work sites in Shanghai. It is preparing to launch a third one now, and is also expanding to Beijing. Mao Daqing, founder of UR Work, said his co-work space brand aims to increase the number of its sites from 40 across 10 cities by this year-end to 60 in 2017. Naked Hub announced in late November that it will accelerate its regional expansion and enhance its property resources via Gaw Capital Partners, aiming to add up to 30 new locations, or about 150,000 square meters and 30,000 members across the Chinese mainland, Hong Kong, and other key cities in Asia. A research note from CBRE on innovative sectors' leasing trends said that China's small enterprises and startups are favoring co-work spaces because their cost is "lower" and their atmosphere appeals to young talent, particularly those working in the TMT (technology, media and telecommunication) space. Sam Xie, research director of CBRE China, said innovative talent tends to work at sites in convenient locations. And when they work together, they can form a "cluster". "Co-work spaces are meeting these demands, so they are increasingly favored," said Xie. Tenants have other considerations too, said real estate agents. Feng Yunxi, a real estate agent with Shanghai-based Fengxiang Real Estate Co, said: "Innovation and entrepreneurship have become a national aspiration. An increasing number of startups are emerging. All of them need a decent space to operate from. They can actually work from their homes or even rented residential flats to save on costs. "But they are looking for a community, where they can feel that they are not alone, where they can get resources, such as business opportunities from other tenants, on short-term lease basis. That's so because startups do realize there's no certainty they will survive in the long run and thrive. If they do, they may need to move to a larger office." That would be a risk though, from the space provider's perspective. Whether tenants' businesses succeed or fail, they would eventually likely move out, leaving the office desks empty. So, operators are evolving new strategies to make their own business viable in the long run. In addition to startups and freelancers, mid-sized and large enterprises are also being courted by co-work site operators. "Co-work spaces may no longer be an exclusive zone for small businesses. Operators' huge investments need a stable turnover. So, a balanced tenant portfolio becomes necessary to hedge risks. "In the US where co-work spaces first emerged, and in Hong Kong where co-work spaces are common, bigger businesses such as banks and technology companies have moved some of their teams to co-work spaces. "The younger generation among their staff prefer such atmosphere and some creative arms of established businesses may not find a fixed seat comfortable and suitable. I think in the Chinese mainland, more co-work spaces will allocate more resources to bigger tenants in the future," said Kenneth Rhee, CEO of Huhan Business Advisory (Shanghai).
1 The rise of the sharing economy presents a new challenge to corporate managers.
2 Admirers say these stars of the so-called sharing economy are breaking up monopolies that have grown greedy and lazy.
3 The theory of sharing economy includes approximately two forms, namely the western theory of sharing economy and the Chinese theory sharing economy based on public-owned system.