China’s sharing economy hits more than a few potholes
Failures mount up for an industry that was estimated to be worth US$605m
Gone is the new economy dictum rolled out by Xiaomi founder Lei Jun that “even a pig can fly if it stands at the centre of a whirlwind”. Now, it appears that companies which were thriving in China’s sharing economy are struggling for survival at the end of drama-filled year.
To put it bluntly, more than 20 companies involved in this fledgling sector have either folded or suspended their services, according to China’s mainland media.
A quick glance shows the trail of devastation from firms that provided rented bicycles, cars, mobile chargers, umbrellas and even clothes.
They were all part of what Beijing called the “sharing economy”, estimated to be worth 4 trillion yuan (US$605 billion) in 2016.
Yet one area that felt the chill wind of failure was the bike-sharing craze, which at its peak had more than 10 market players.
By the end of the first six months of the year at least six of them, including Wukongbike, Mingbike and 3vbik, had gone. Then in November, Bluegogo, which was part of the big three, ran into trouble.
Now, there was just a big two, Mobike, which received funding from Tencent, and ofo, which Alibaba invested in.
Similarly, US$1 billion from leading private equity funds, such as IDG, Sequoia and Tencent Capital, were thrown at 19 mobile charging ventures in China during the past two years.
But within the first six months of 2017, seven of them had closed in a crowded market place. The umbrella-sharing trend also failed to take off.
When 20,000 umbrellas were made available in Guilin, a city in northeast China’s Guangxi Zhuang Autonomous Region, most of them ended up broken or stolen within two weeks.
Then, of course, there was the educational venture Xinggong Piano. Xiaomi kingpin Lei invested in two of the startup’s four rounds of financing.
But Xinggong failed to hit the right notes and abruptly closed down, leaving 60 national outlets vacant after running out all cash.
And no one knows better than Lei the feeling of pigs that do not fly at the centre of a whirlwind.