China is fast embracing the sharing economy, having come up with its own innovative resource sharing platforms to rival foreign counterparts such as Uber and Airbnb.
According to a report published by China’s State Information Center, the sharing economy is expected to maintain a 40% annual growth rate over the next few years, and is officially forecast to account for over 10% of the country’s GDP by the year 2020, and 20% by 2025. The sharing economy in China is expected to generate revenues of up to RMB 5.7 trillion (around 915 billion USD) in 2017.
Many people see the sharing economy as a logical and positive development because it turns excess supply into revenue, and fits into the state’s larger initiatives to transform the country from an economy driven by manufacturing to one driven by services, by means of nurturing innovation.
Despite these advantages, China’s sharing economy still faces legal and regulatory hurdles, on top of issues with regard to consumer negligence, such as vandalism and hoarding of resources, particularly in the bike sharing industry. While established industry players are putting pressure on the government to regulate both sharing platforms and users, the Chinese market as a whole is increasingly willing to share.
The regulatory environment of China’s sharing economy is fragmented. Though there are certain regulations in place covering the ride-hailing and bike-sharing industries, they are still incomplete while the housing sharing sector is still fairly unregulated. As the sharing sector is still emerging, regulations will have to evolve to keep up with the changing demands of consumers and the business models new competitors bring into the game.
The Chinese government welcomes the sharing economy, and so do major companies. They see the sharing economy as a way to provide the government, businesses and consumers with mutual benefits. That is why China sees itself as a forerunner in terms of the global sharing economy, setting the standards in both regulatory practices and infrastructure reform. Furthermore a recent consumer survey showed that 94% of respondents said they were willing to share resources.
China’s ‘Internet Plus’ strategy aims to integrate online business models with traditional industries, making it easier for startups to launch online enterprises. As apps play a large role in sharing platforms, penetration is direct, with an estimated 601.8 million Chinese citizens now regularly using smartphones.
While there are still many challenges facing investors including the lack of uniform regulation and personal credit reporting, these features will develop over time and form an effective and user-friendly sharing experience.