Why Does China Love The 'Sharing Economy'? Not Because Of Communism…

Culture

from the if-you-rent-a-cheap-bike,-you-may-be-the-product dept

Something strange has been happening in China. People have been going nuts about bicycles. Specifically, investors have gone crazy over startups that allow people to rent bikes for a fraction of a dollar per hour, and then leave them anywhere, rather than only at special bike stations — what is known as “dockless” bike-sharing. And now that sector is in trouble, as Bloomberg reports:

In the space of 18 months, dockless bike-sharing has become one of the hottest investment trends in China, with the two biggest players each having raised over $1 billion in venture funds, respectively. That money has funded a revolution on the traffic-choked streets of Chinese cities, giving urbanites a low-cost, carbon-free means to get around quickly. What it hasn’t produced is a viable business model. A little over a year into China’s bike-sharing boom, the industry’s future looks precarious.

Given the extremely low margins, that’s no surprise. What is more surprising is that billions of dollars have been invested in these startups, and in similar ones based on renting out everyday objects for short periods of time, letting people pay by using smartphones to scan in QR codes. Other examples include companies offering umbrellas, basketballs, refrigerators, luxury handbags, phone chargers, and even sex dolls (that one didn’t last long). An illuminating article in the New York Times has a plausible explanation for China’s fascination with the so-called “sharing economy”, even though it has nothing to do with real sharing:

None of China’s bike-sharing companies are turning a profit yet. But even as they fight for market share, the data is the destination. “Collecting data is the first goal of the sharing economy,” says William Chou, the head of Deloitte’s telecoms, media and technology practice in China. Every time consumers scan the QR code on a bicycle — or basketball, handbag, umbrella — they provide information about habits, locations, behaviors and payment histories. That’s invaluable not just to [Chinese Internet giants] Tencent and Alibaba but also to city planners seeking precise information about where to build roads, bridges and subways.

In other words, these “sharing” services are conceptually similar to Facebook or Google: they are provided (nearly) free of charge, but you pay with detailed information about what you do. In the case of Facebook and Google, it’s data about your online activities; for the “sharing economy”, it’s about what you do in the physical world. That’s highly prized by companies that want to sell something to people. In China, it’s also of great interest to someone else — the government:

what happens as this data filters into China’s new social-credit system, which promises to rate every individual by her financial, social and political worth? In fact, Beijing has authorized Tencent and Alibaba to conduct social-credit pilot testing, and their bikes serve as the perfect vehicles. There are no walls of privacy. The government has the ability to access company data, good or bad, faster than you can scan a QR code.

The ability of “sharing” companies to capture, and governments to access, highly-personal data is an important issue for potential customers in the West, which currently lags behind China in the uptake of these kinds of services. However convenient some of them seem, it’s worth considering whether you may be paying more than just the attractively-low fees when you use them.

Follow me @glynmoody on Twitter or identi.ca, and +glynmoody on Google+

Filed Under: china, sharing, sharing economy