Is the shar­ing econ­omy over­val­ued?

China Daily (Hong Kong) - - VIEWS -

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 a 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, sec­ond­hand 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 sharinge­con­omy 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 sharinge­con­omy 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.

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