Time sharing economy lived up to its name
Perhaps there is no term as popular, yet controversial, as “sharing economy” to be the buzzword for 2017 in China. Just as the first sentence in A Tale of Two Cities by Charles Dickens, “It was the best of times, it was the worst of times”, for the sharing economy in 2017.
The sharing economy has gained widespread popularity not only because of the capital invested in its projects but also because of the support it has got from the authorities. According to State Information Center’s China Sharing Economy Development Report 2017, the trade volume of the sharing economy reached 3.45 trillion yuan ($532 billion) in 2016; and it is expected to maintain a 40 percent growth rate in the coming few years. It was even written into the 2016 and 2017 Government Work Report.
But the development trend of the sharing economy suddenly hit the brakes in the latter half of last year, even if temporarily. According to incomplete statistics, last year 27 sharing economy startups went out of business, including seven shared bicycle enterprises, seven shared power bank enterprises, four shared clothes enterprises, and three shared toy enterprises and three shared automobile enterprises. In addition, one-third of the failed sharing economy companies lasted less than one year, prompting the media to call it “the crematorium of startups”, and many people to question the existing model of the sharing economy.
Ideally the sharing economy should be about pareto improvement: a neoclassical economic concept, which means an action taken in an economy that harms no one and helps at least one person. In other words, it means people and enterprises sharing idle resources through information and communications technologies to increase the utilization efficiency and reduce costs of individuals as well as society as a whole.
But the existing sharing economy business model deviated from this win-win principle. No wonder many question whether its existing business model can even be called “sharing”. Take shared bikes, the most popular sharing economy business in China, as an example. Instead of using existing idle resources, shared bike companies produced and purchased huge numbers of new bicycles to put them into the market. Their business model is based on customers paying the lease for the bikes owned by the companies. Such a business model should be called “lease economy” rather than sharing economy, not least because it has created as many problems for society as the benefits it has offered.
According to the SIC statistics, till July last year, about 16 million shared bicycles were in operation nationwide, which have caused many urban problems such as illegal parking and inappropriate scrap disposal, because more than the needed numbers of bicycles were introduced to cities. Many media reports said that hundreds of thousands of scrapped shared bikes had piled up in the suburbs, which they called the “graveyard of shared bikes”.
Although many major cities have required companies to stop launching new shared bikes, the companies ignored the regulations to introduce new bikes to compete with rival companies and grab a bigger share of the market.
The pseudo-sharing economy failed to activate idle resources to increase efficiency, and instead caused social chaos and tremendous waste of resources. Their economic endeavors can hardly be described as sharing economy, which is supposed to improve social welfare. It is more like naked competition to acquire market monopoly.
Worse, shared bike companies can embezzle customers’ deposit. In September 2017, Kuqi, a shared bike company operating in more than 10 cities, pocketed several hundred million yuan of customers’ deposit and unilaterally blocked the deposit refund channel online and offline. Such scandals undermine the development of the sharing economy.
But despite the sharing economy facing great challenges, it still has great potential to develop into a successful, win-win business model. In fact, the current chaos offers a great opportunity to reshuffle the industry, and revert to the socially and economically beneficial-for-all business model of the sharing economy. Only by following a good business and sustainable development model can the sharing economy benefit society.
Macron visited Xi’an in Shaanxi province, the starting point of the ancient Silk Road, on Monday before holding formal talks with Xi. Hopefully, his endeavors will help him understand China better and lead to fruitful and in-depth discussions between the two leaders.
He has also sent his own message across to China — through his book Revolution, whose Chinese translation went on sale in China to coincide with his visit. In the book, he has vowed to reshape the change-resistant but challenge-laden France and European Union by launching radical reforms. He has also urged the West to view China as an opportunity, instead of a threat.
The 40-year-old Macron has highlighted reforms at the right time, as this year China will celebrate the 40th anniversary of the launch of opening-up and reform, which led to unprecedented economic development and transformed the country into the world’s second-largest economy.
China has vowed to deepen market-oriented reform in the country, while promoting globalization and helping improve global governance regime. These pledges are in line with Macron’s policy recommendations for France and the EU.
Xi first visited the EU headquarters in Brussels in early 2014, and entered into an agreement with the bloc that both sides would establish a reform partnership. So while pushing their respective reform agenda at home, China and France can work together to strengthen globalization and free trade, and Xi and Macron are expected to touch upon the issue during their talks.
Macron is not alone in promoting reform, and deepening cooperation with China. A widely-circulated video filmed by a French national, who after working for years in China could not adjust to the life in France upon his return, shows French citizens are willing to usher in WeChat, a social media communication app, and mobile payment schemes. The French video-maker introduced WeChat and other mobile apps that are popular in China to France.
Macron should take such public needs into consideration while implementing new reforms in France and the EU, especially because China is making efforts to improve its business environment. And to attract more Chinese investment to further invigorate its economy, France should refrain from acting like the United States, which has been misusing so-called security reasons to stop China’s investments in the US despite their beneficial impact on the American economy.
Macron is a reformer, but he also supported other EU leaders in launching an investment screening system in the name of protecting the strategic sectors. The French president would do good to realize that such moves carry the risk of stemming inbound investment and forcing other countries to take counter measures.
Given the state of the global economy and rising anti-globalization sentiments in many parts of the world, it is crucial for China and France to set an example for other countries by functioning like true market economies which welcome reform and open trade.