Sharing Economy in China. New Way of Consumption or Economic Revolution?

21/10/2019

A new economic model is changing how Chinese people perceive consumption. Driven by new technologies and a mobile-first society, the sharing economy is wiping out ownership in China

 

The advent of technology has revolutionized traditional business models all around the world. In particular, in China, the mobile-driven society is bringing back old traditions like that of sharing.

Due to China’s socio-economic history, a brand-new sharing economy is changing Chinese people’s habits and lifestyles. A change that goes hand in hand with the country’s shift towards sustainability.

The sharing economy is an economic model in which access to goods and services is shared between private individuals, typically by means of the internet. The system revolves around short-term renting of resources, which is often facilitated by a community-based online platform.

 

The sharing economy in the PRC grew 41.6% year-on-year in 2018 to $439 billion. In the coming three years, the market value of China’s sharing economy will expand by an average rate of 30%, according to a report released by the State Information Center.

 

The China Internet Report 2019 issued by the South China Morning Post shows how consumers in China are increasingly embracing the sharing economy. Thanks to emerging startups, Chinese people are now sharing cars, vacation homes, clothes, and even kitchens.

This fact is notable since it brings to the surface how the Chinese e-commerce industry is becoming more and more inclusive and customer-centric. Once again, products and services are no longer the only factors that influence purchasing decisions but customer personalization and experience are now part of the action.

 

sharing economy in china - ofo bike - cifnews

© Unsplash. President Xi Jinping praised the expansion of the sharing economy as “a new driving force for the economy”.

 

Colorful bikes crowding the streets of major Chinese cities are the most prominent sign of this business. Car-hailing is another successful service, which sees many local market leaders. Accommodation-sharing and hospitality are also going strong, allowing international players such as Airbnb to compete with domestic ones. Other initiatives that are spreading like wildfire also include mobile power banks and umbrellas sharing. Even factories now share their production capacities and industrial designs to hatch additional profits.

Given that sharing meets the green economy’s criteria, the Chinese government has made it a priority. It is, in fact, working with private firms to make the industry sustainable and an integral part of the reform process.

Nevertheless, multiple factors have led to the rise and expansion of the sharing economy in China. First and foremost, Chinese people seem to prefer renting rather than owning infrequently used goods in order to save money for more pressing needs.

 

The essence of the sharing economy is to improve utilization through reuse and recirculation of unused resources.

 

During the last decades of immense economic growth and increasing purchasing power, Chinese people started to accumulate things. With the emergence of e-commerce, consumption has also grown. However, it has recently slowed down. This means that for a lot of people in the Middle Kingdom, ownership is losing ground to sharing.

Owning numerous items like portable chargers often involve a fair amount of inconvenience. For example, charging a power bank requires time, its maintenance or replacement requires money, and carrying it around might be uncomfortable. A bicycle, instead, could be stolen, it needs a storage room or a designated parking spot, and it is not possible to carry it on the subway.

Young Chinese are thus happy to put an end to this cycle of trouble in favor of sharable goods. Buying a bike or a power bank will undoubtedly be cheaper in the long run, but sharing them will wipe out all the inconvenience that ownership could bring.

Moreover, traditional models worldwide do not meet customers’ needs as much as shared options. Being based on consumers’ demands, the sharing economy provides numerous choices based on financial capability, the immediacy of the service’s availability, and the performance history of the host.

 

sharing economy - mobike - cifnews

© Unsplash. In a formal recognition from the UN, Mobike, a bicycle-sharing company from Beijing, recently received Champions of the Earth Award.

 

The PRC is often referred to as a mobile-driven country. With just a smartphone, today, people can not only shopping but also satisfy any kind of request. Paying for goods, as well as renting a bike, a car, an umbrella, or a power bank, this can all be made via mobile phone. Therefore, today, leaving home empty-handed is normal in China.

Sharing thus represents the ultimate development of internet technologies allowing people to solve virtually any routine problem with a smartphone. After all, Chinese people have already given up their physical wallet. So how could anyone expect them to carry extra stuff?

Didi Chuxing is the most used app to get cabs and bikes in the Dragon. Meituan, instead, is the number one Chinese e-commerce for services, especially food-related ones. JieDian Mini Program in WeChat provides sharable power banks while Xiaozhu and Tujia are the leading players in the home-sharing sector.

 

An example of how the sharing economy is booming in the Asian country is the recent emergence of power banks’ renting services.

 

Although this service is not so common beyond the Chinese borders, local players have managed to carve out a sustainable future in China. As of the first half of 2019, the cumulative number of JieDian users has reached 107 million with the company’s revenue last year exceeding $112 million, and their operating profit reaching $5 million. Moreover, according to iiMedia Research, the number of shared power bank users in China will break the 300 million mark in 2019 reaching 400 million in 2020.

Young people have been the heaviest users of sharing platforms in the Middle Kingdom. Being more mobile, price-sensitive, and tech-savvy, they are more willing to share infrequently used goods, thus saving both money and extra effort. Moreover, the enthusiasm for mobile payments has turned cyberspace into a place for all kinds of transactions, thus opening up new windows of opportunities for entrepreneurs and businesses.

It could be said that Chinese people have become dependent on the services provided by the sharing economy. And this has led the industry to turn from just an innovative trend into a proper economic model, revealing a clear way to profitability. It is both a step towards a better distribution of wealth and a means of supplemental earning in the community.

Ordinary people are, therefore, becoming savvier and more accustomed to sharing so much so that even the government is now implementing viable and consistent regulations.

 

sharing economy - didi chuxing - cifnews

© Didi Chuxing. In China, car-sharing is instrumental in helping the government put more electric vehicles (EV) on the streets.

 

The sharing economy has spread in China much more than other parts of the world. Here 94% of people are willing to accept sharing, whereas in the US, for instance, the ratio only reaches 43%. No wonder in 2018, every second technology unicorn in the Middle Kingdom had its roots deep in the fertile sharing economy soil, according to the State Information Center.

The sharing frenzy is also enabling more judicious use of private and public resources. Even the burden of traffic has eased in major cities and instead of burning fossil fuels, both people and the government are now increasingly looking for sustainable alternatives. Beijing thus sees shared-mobility as a frontier for expanding its EV ambitions, reducing pollution and road traffic.

 

The results of this new economic model are remarkably beneficial for the environment, especially since bike and car-sharing are contributing to the reduction in carbon emissions.

 

Chinese society’s massive adoption of technology will continue to drive the sharing economy. The consumer data produced by every digital transaction in this model of economy can be used to optimize consumer habits and the channels through which they are targeted. It is thus hard to imagine that a generation of Chinese youth growing up on sharing could ever backtrack to buying.

Sharing is convenient for people and meets China’s ambitions to become a green economy. But this trend is not limited to the Celestial Empire only. And it is certainly a trend worth sharing.

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