The dark side of China’s sharing economy
In a recent comment that appeared on Bloomberg, China is seen as a marvelous place for companies participating in the sharing economy. The arguments that are brought up are drawn from an investment boom in the sector, which has recently pushed up many unicorns. Despite this, I do not share the enthusiasm shown by the author.
First, China is very much a place where people, even the commonest ones, make an effort to invest, to make it through, fostering an investment environment that is too unstable and unpredictable, and the Chinese stock market is a good example. Even though many foreign investors are attracted by promising projects, they account for a small slice of the huge amount of money put into Chinese start-ups and well-established companies.
China offers many opportunities, and this is well known by the Chinese, and this means that, as in the housing market, huge investment does not mean healthy investment. On the contrary, the Chinese market presents many risks and loopholes that can result in investors losing everything. Even in a trending market like the sharing economy.
Second, even though the large scale of the Chinese market could put a shadow on it, there is a human factor to be taken into consideration. Walking around the streets of Xi’an, I come across many Ofo (China’s Uber for bikes) shared bicycles but, of every 10 bikes, eight are broken or unusable because of someone scratching away the bike number and QR code. And the more I walk the more I think it’s an established norm. A strategy like this could only be justified with a large-scale market, where it would be more probable to quickly recover from the loss.
Mobike has entered the market with a more sophisticated GPS lock system, which makes more sense in terms of the human factor. In fact, wandering around I see there’s plenty of them, all in perfect condition and all available, probably because the chances of hacking them are lowered to almost zero
The Bloomberg article also points out that, since the Chinese middle class is facing escalating economic and social burdens, it seems willing to adopt the sharing economy. However, the middle class has been a great engine of consumption, and it is hard to believe that this trend will somehow stop. Moreover, even if sharing services might be attractive and, to some extent, save people money, the allure of possessing a personal car or a house will always be powerful for the Chinese middle class, or Chinese in general.
China could give birth to many innovative companies in the coming decades. However, I don’t share the enthusiasm of many observers for the sharing economy, and the main reason is cultural. In order to build a healthy sharing economy, people must be taught to embrace it, and China is not there yet.