More prudent regulations to come for China’s sharing economy, says Premier Li Keqiang

Chinese Premier Li Keqiang says more prudent regulations will need to be adopted to help grow the country’s sharing economy, which has sparked public concern after years of being a magnet for major venture capital investments.

“Like any new business, [the sharing economy] has its ups and downs,” said Li in a press conference on Friday to mark the conclusion of the annual gathering of China’s parliament. “But in general, it creates jobs, brings convenience to people and drives the development of relevant industries.”

He said the government’s focus will be on increased public security and safety, while assuring there will be no arbitrary rules that could potentially impede progress in the sector.

The premier’s comments come amid rising concerns over how China’s 3 trillion yuan (US$446 billion) sharing economy could manage sustainable growth amid recent high-profile controversies.

The sector has been hit hard by a safety crisis at Didi Chuxing, operator of China’s largest ride-hailing services platform, as well as the collapse of bike-sharing firm Ofo and lay-offs at rival Mobike.

Beijing-based Didi started a major overhaul of its operations in January to enhance safety and efficiency, as the company sought to regain public confidence rocked by two passenger deaths last year.

The company was celebrated as a Chinese tech champion after it outlasted Uber Technologies in a ruinous subsidy war in 2016. Its shareholders include Apple, Tencent Holdings, Baidu and Alibaba Group Holding, which owns the South China MorningPost.

Ofo, a pioneer in China’s bike-sharing market, is on the verge of bankruptcy, which forced it to shut down operations in Australia, Austria and Germany, among various locations. The Beijing-based start-up has been sued by suppliers for unpaid bills, while nearly 12 million users wait for deposit refunds.

Not long ago, Ofo was operating in more than 20 countries and attracted US$2.2 billion of funding from big-league investors like Alibaba. Ofo founder and chief executive Dai Wei has recently been placed on a blacklist of credit defaulters. 

Rival Mobike, owned by on-demand services giant Meituan Dianping, recently laid off its Asia-Pacific operations team, under a restructuring prompted by the sharp downturn in the bike-sharing market.

“Joy and trouble go hand in hand in the growth process,” Li said. “What we need to do is to guide the healthy development of new [industry] models and businesses.”

Li expressed confidence that there was plenty of room to grow for the sharing economy and the larger internet services industry. He said the government’s Internet Plus strategy, which was introduced in 2015 to help the digital transformation of industries, will be extended to more sectors.

China’s sharing economy recorded a 41 per cent year-on-year increase in revenue to 2.9 trillion yuan last year, fuelled by the demand in the ride-hailing, flat-sharing and food delivery market segments, according to a report last month by the State Information Centre, a think tank affiliated with the National Development and Reform Commission.

It estimated the sector has helped create about 75 million jobs in China, which is now faced with a slowing economy. As many as 34 of China’s 83 unicorns – start-ups valued at least US$1 billion – come from the sharing economy sector, the report said.