Officials: Sharing Economy Booming In China; Success And Challenges Of New Business Models

The sharing economy is booming, disrupting conventional ways of doing business, creating new jobs, and new headaches for policymakers. China is promoting the sharing economy as a national strategy, as explained during the annual United Nations Conference on Trade and Development (UNCTAD) electronic commerce event this week, and illustrated by DiDi Chuxing, a leading Chinese mobile-based transportation platform.

UNCTAD’s E-Commerce Week is taking place from 16-20 April.

A panel titled “Development Dimensions of the Sharing Economy, Learnings from China” was organised by the China Chamber of International Commerce, UNCTAD, and DiDi Chuxing, on 17 April.

The sharing economy is “an economic model defined as a peer-to-peer based activity of acquiring, providing or sharing access to goods and services that are facilitated by a community based on-line platform,” according to Investopedia.com. Famous sharing economy actors are Uber or Airbnb, and have multiplied in recent years all over the world.

According to an UNCTAD background document [pdf], the sharing economy will surge from $14 billion in 2014 to $335 billion by 2025 globally. The market value of the sharing economy in China is expected to maintain annual growth of about 40 percent over the next five years, it says.

China’s Sharing Economy Booming

Wenliang Yao, deputy permanent representative and minister councillor at the Chinese mission in Geneva, highlighted gains in China. He said innovation is the way forward and remarked on the rapid development of the sharing economy in China. The sharing economy turned people from consumers to producers, he said, adding that it is changing the way of life of people around the world.

China is shifting from a high speed to a “high quality development.”

Sharing is an intrinsic feature of the internet, said Nan Fang, director general, Mobile Internet Bureau, Cyberspace Administration of China. He said China leads in terms of market size of its sharing economy, which has penetrated a number of areas including transportation, healthcare, education, and catering.

The sharing economy provides jobs and helps stimulate inclusive growth, he said, adding that in 2017, preliminary estimate found that 700 million Chinese participated in the sharing economy.

DiDi, 7.4 Billion Rides

Jianhua Li, chief development officer of DiDi Chuxing, characterising DiDi as the world’s largest mobility platform, said it completed 7.43 billion rides in 2017.

DiDi started with taxis, with almost all taxi drivers connected to the DiDi platform, he said. He explained the rapid success of DiDi with the fact that the platform answered problems met by Chinese people looking for a taxi in cities, in particular at rush hour.

He underlined the “creative spirit” prevailing in China today. Most college graduates want to create their own companies, he said. China is a very good environment to create one’s own business, he added.

According to Li, the internet infrastructure in China is very efficient, thanks to government investments, and broadband is available almost everywhere, even in villages.

After bringing in taxi drivers, the platform went for private cars, offers a wide range of vehicles, even bikes, and added a “hitch” service of car sharing. Some 2 million people use the hitch service daily, he said. Out of the 10,000 employees of the company, he said, half are engineers, big data scientists.

DiDi’s activities are consistent with the UN Sustainable Development Goals, he said, as it has provided 21 million job opportunities for people in China, 2.3 million of which are women, he said. DiDi has contributed to reduce poverty, has a positive impact on gender equality, and provides benefits for the environment.

The goal of DIDI in 2018 is to expand its business globally, he said.

Reasons for Success, Access, Governance Challenges

During a roundtable discussion, after the panellists’ presentations, Pakistan Ambassador Farukh Amil noted that the sharing economy has to be inclusive. He also remarked on the lack of basic technical infrastructure in developing countries, and lack of ability to deliver high-speed internet, and on the broadband divide. He underlined the need for education and skilled workers, and the need for a continued supply of trained manpower.

Arun Sundararajan of the New York University Stern School of Business said several factors encouraged the rapid development of China’s sharing economy. Among them: the Chinese entrepreneurial culture, the availability of venture capital, a young middle class, an urban concentration of spending power, and large cities being a natural setting of the sharing economy.

There was also no entrenched behaviour in China, such as car ownership, he said. China is a leader in artificial intelligence, and is powering the next generation of online platforms. he added.

Lan Xue, dean of the School of Public Policy and Management at Tsinghua University, said governance of the sharing economy is an issue of major concern, with the major challenge being how to promote innovation and provide proper governance.

Several challenges face policymakers, he said, the first one being how to create a new conceptual framework. Other challenges include how to deal with a new form of employment, how to define monopoly, how taxes can be collected and on which basis, he said.

Among other questions are what kind of business practices are fair and legitimate, and how can data privacy issues be addressed, he said. There are many new phenomena and issues that governments have to tackle at the same time, he explained.

The transitional problems also have to be addressed, as many new business models born out of the sharing economy are bringing disruption to traditional industries and old business models, he said. There is some resistance from traditional models, he said, and there is a need to promote innovation but at the same time address new issues, such as the necessary creation of a new social safety network, and the provision of adequate training to workers.

Another issue is how to follow business innovation, according to Xue, in particular as policymaking is slow at following innovation practices of all those new companies.

There might be a need for governments to adopt a so-called “adaptive governance” approach, he said, as there is a new relationship between the government and businesses, with more partnering in developing new regulatory rules, he said.

There is also a need to establish trust and credibility among government, business, and society, which is critical for having a partnership relationship, and for having some dynamic set of rules that may need to change from time to time, he said. That might mean a change in policy practices, he added.

Janine Berg, senior economist at the International Labour Organization, remarked that the sharing economy is providing exciting new opportunities and creating a set of new jobs. However, if some are worried that the sharing economy might lead to unemployment issues, she said the ILO is more worried about the kind of jobs created by the sharing economy, and in particular the fact that those new jobs are often casual jobs.

 

Image Credits: Catherine Saez