(Yicai Global) Feb. 21 -- Chinese second-hand car trading platform Renrenche has hit back at rumors suggesting it is about to file for bankruptcy by unveiling plans for employees to run mini franchises.

The Beijing-based firm is shifting to a New Retail model, it said in a post on Weibo on Feb. 18, citing an internal letter distributed by Chairman Li Jian the same day. Li also posted on WeChat that day to thank the district government of Jinniu, Chengdu, for investing CNY4 billion (USD595 million) in Renrenche.

The company is offering employees the chance to become seed partners in the venture, the post added, saying the firm will also set up a CNY80 million (USD11.9 million) support the subcontractors. The statement refutes a Feb. 19 report from Finance and Investment which suggested Renrenche is cutting back on its physical stores and reducing staff numbers, and has already shut down its Chengdu operations center and is forcing workers into resignation.

That followed a China Business Journal report in November that said the company had shut down branches in Beijing, Shanghai and other cities, closing 20 percent of its urban businesses overall. It had also removed "covering over 100 cities" from its ad campaigns, and now lists less than 80 on its service list, the report added.

Renren has been testing the new strategy in Hangzhou and 17 other cities over the past year, Li said in the internal statement, adding that sales, user satisfaction and other core indicators all rose significantly within months of trialing the approach.

But staff do not seem too enthused. The so-called Partner Project requires staff to pay CNY30,000 (USD5,950) for a user data pack containing 250 pieces of information and a non-refundable CNY10,000 guarantee, employees said, adding that the data is not worth the price. Workers need to resign before joining the project on a six-month contract.

China is the world's largest new car market and its used car sector is growing rapidly, particularly online. But sellers are easily able to manipulate cars' mileage, warranties and other information as there is no mature system for tracking car maintenance in the country, which can be hazardous for buyers.

Hordes of capital made its way into the sector, leading to hasty expansions and chaotic marketing that have seen Renrenche and rivals Youxin and Guanzi struggle to turn a profit.

Founded in 2014, Renrenche was the first company to tap China's customer-to-customer used car market and has since become a comprehensive auto trading platform encompassing financial services and customer support, as well as an affiliate of ride-hailing giant Didi Chuxing.

It has undergone six funding rounds since founding, racking up USD755 million from the likes of Didi, Tencent Holdings, Goldman Sacks and China Minsheng Investment Group.

Editor: James Boynton