China’s slam dunk ‘sharing economy’ booms, but can it last?
BEIJING: Fancy shooting some hoops, but don’t have a basketball? Caught in the rain with no umbrella? Smartphone run out of juice?
China’s rapidly expanding ‘sharing economy’, which already provides car rides and bicycle hire on demand, can help.
For just 2 yuan (USUS$0.30) an hour, Nate Liu, a student at the Beijing Language and Culture University, rents a basketball from a court-side vending machine by scanning a barcode on his smartphone.
“I didn’t want to ask around and borrow a ball after losing mine, so I decided to give it a try,” Liu told Reuters.
Far away, in China’s wetter south, some 20,000 umbrellas have been released on to the streets of Shenzhen, and can be rented – unlocked by another smartphone barcode scan – for just half a yuan (US$0.07) for 30 minutes.
The umbrellas can be dropped off “wherever convenient”, though users are encouraged to keep them, says Zhao Shuping, founder of E Umbrella Sharing, one of a handful of start-ups offering the service.
China’s government has taken notice, and expects the “sharing economy” to grow about 40 per cent this year to 4.83 trillion yuan (US$705 billion).
By 2020, it should account for around one tenth of GDP, illustrating China’s aspiration to become a sharing economy leader on a global scale.
PricewaterhouseCoopers predicts five sharing sectors – car sharing, travel, finance, staffing, and music and video streaming – have the potential to increase global revenue to US$335 billion by 2025 from US$15 billion today.
Most of the money behind China’s ballooning sharing economy
I didn’t want to ask around and borrow a ball after losing mine, so I decided to give it a try. Nate Liu, a student at the Beijing Language and Culture University
comes from angel investors and venture capital firms.
At least 1.69 billion yuan (US$247 million) in mostly series-A, or early stage, funding was invested in April-May in over two dozen start-ups offering sharing services, according to Reuters calculations based on data from Chinese data firm IT Juzi.
Twelve firms renting out power banks – typically compact, mobile battery chargers – secured 1.13 billion yuan, while newer businesses such as basketball and umbrella-sharing took in about 25 million yuan (US$3.65 million) combined.
While mobile- savvy, convenience-obsessed Chinese welcome the innovations, some critics question whether the demand is real, or sustainable.
They say the low-revenue, capital-intensive model means profitability can be elusive.
“Young people are embracing renting as a way of life instead of possessing things,” said Emma Zhu, investment director at Beijing-based Innoangel fund, who has held off investing in any of these start-ups.
“But the sharing model won’t work in every situation. In some cases, they’re trying to meet genuine demand, while in others they’re not.”
Some investors say the funding frenzy recalls the spectacular boom and bust of hundreds of Chinese Groupon apps in vogue in 2010-12, noting that most ultimately collapsed after fierce price wars, with losses of around US$1 billion. — Reuters