China’s Sharing Economy Delivers Pain and Gain

Yicai

2017-03-29

(Yicai Global) March 29 -- Chinese startups offering services ranging from on-demand car hire to paid answers to questions have been the darlings of investors. But government rules and fierce competition are likely to lead to a shakeout across China’s emerging sharing economy.

The sharing economy has taken off in the world’s most-populous nation thanks to the widespread use of smartphones, andthe government has said it will promote its development as a pillar of the new economy.One estimate says the sharing economy couldaccount for 10 percent of China’s GDP by 2020. But it also poses new challenges for regulators, censors and law enforcement.

Didi Chuxing drove Uber out of China last year only to face an anti-trust probe and the world’s first ride-hailing regulations. Didi is now restructuring its business, which is worth at least USD35 billion.Fenda, once China’s hottest online question-and-answer app, temporarily shut down last August possibly due to censorship issues, whileShanghai’s transport police recently scolded bike-sharing operatorsMobike andOfo for disorderly docks.And the government has come down very hard on peer-to-peer lenders following a spate of scandals.

Investors haven’t lost interest in China’s sharing economy, though.Mobike, a 10-month-old companyset up by a former Uber China executive,has secured USD300 million in funding since the start of this year alone.

Government oversight is reining in the wilder areas of China’s sharing economy. More regulation will follow. Competition will also thin out the pack.In the months and years ahead we can expect more disruptors to rethink their strategies and more to go to the wall. It’s just part and parcel of a maturing market.

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