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Friday, March 18, 2016, 15:13

Asia embraces sharing economy

By CORNELIA ZOU in Hong Kong
Asia embraces sharing economy
A pizza delivery rider waits for an order outside a pizza restaurant in Beijing in September last year. The Internet has transformed traditional se rvices, including food delivery, and helped mobilize a scattered workforce. (AFP)
In Asia’s fast-growing new economy, even pizza delivery can turn into a business worth hundreds of millions of dollars.

This is exactly what Ele.me, a Chinese food delivery startup managed last August, when it raised $630 million through a group of private investors.

The money was provided by major companies including CITIC Private Equity, retail chain Hualian Group, China Media Capital and investment company Gopher Asset.

“Sharing is the most advocated value of the Internet, so a lot of the business model called ‘the sharing economy’ has surfaced in recent years,” said Liu Jing, a spokesman for Ele.me, whose online-to-offline (O2O) platform allows consumers to order food deliveries using their mobile phones.

“The core of the sharing economy is the distribution of unused resources,” he said. “The labor force is a kind of resource too.

“For society, this has mobilized a scattered workforce and eased employment pressures. For restaurants, it has solved delivery problems and for users, this will significantly shorten waiting time.”

This type of business, which taps into new economic models facilitated by technology, better telecommunications and deep Internet penetration, will be a key theme at the annual Boao Forum for Asia (BFA), being held March 22-25.

The annual gathering of government, business and academic heavyweights in the southern Chinese province of Hainan this year has the theme, Asia’s New Future: New Dynamics, New Vision.

The conference will feature panels and discussions about how these new economic models will shape Asia’s future.

According to the BFA, one study suggests that the sharing economy will be worth $330 billion globally by 2025.

“A lot of small to medium enterprises in China are facing difficulties with financing, (but) with the government’s policy support there is a trend of mass entrepreneurship and innovation,” said Jin Lin, vice-president at JD Finance and a speaker at the BFA conference. “Crowdfunding has grown fast (against) such a background.

“Product crowdfunding is a reward system for supporters. There is a return risk for the users,” added Jin, who believe crowdfunding will grow rapidly. “Decentralization will be the trend for crowdfunding in the future.”

Such new models of financing are providing alternatives to weak financial and banking systems in a whole range of industries across Asia, like agriculture and moviemaking.

In Indonesia, for example, a number of new startups tailored to the market have sprung up, such as Go-Jek, which facilitates the sharing of motorcycle rides.

In a 2014 survey, market intelligence firm Nielsen found that 87 percent of Indonesians are likely to participate in a sharing community compared to about 66 percent globally.

Nielsen also found that people in the Asia Pacific are the most willing in the world to share resources, at 78 percent. The region also has the highest percentage eager to rent from others, at around 81 percent.

In North America and Europe, only about half of respondents are willing to share and even fewer would pay to share somebody else’s apartment or car.

According to research firm CB Insights, by February there were numerous companies involved in the sharing economy that had made it into the ranks of the largest 151 privately owned enterprises. Each had a value of over $1 billion.

Among this group are Chinese car-sharing company Didi Chuxing, as well as the US-based Uber and Lyft. House-sharing service Airbnb and cloud-sharing service provider Dropbox are included, as is Tujia.com, a Chinese company providing travel services.

The sharing economy has emerged as a key driver of economic growth in Asia and around the world. China wants to develop between five and 10 mega platform-type enterprises involved in the sharing economy over the next decade.

In a government work report on March 5, Chinese Premier Li Keqiang said the government will “support the development of the sharing economy, increase the availability of resources, and bring prosperity to more people”.

In February, the National Information Center and the Internet Society of China formed a working committee focused on the sharing economy.

The committee has already released the country’s first report focused on the development of the sharing economy, which was worth almost 2 trillion yuan ($307 billion) in 2015 and involved 500 million participants in sharing activities.

It also forecasts that the market will grow by almost 40 percent each year over the next five years and will account for about 10 percent of China’s GDP by 2020.

The report defines the sharing economy as “a new economic pattern that appears at a certain development stage of the information revolution” and has six major features: It is based on a platform provided by the Internet; it includes participation of the public; it features high mobility and fast distribution of resources; its ownership rights do not change; it provides a good experience to users; and it focuses on the efficient use of resources rather than ownership.

Changes in income levels in China have created a class of consumers with higher incomes and who are more focused on personal experiences and value.

At the same time, participating in the sharing economy makes it possible to earn extra income by offering fractional time and services.

This is a big reason why the sharing economy has made inroads in China in areas such as finance, living services, transportation, knowledge and skills, and short-term rentals.

In 2012, those few startups in the short-term rental field had a market value of around 140 million yuan. Within two years they had grown to 380 million yuan.

That the sharing economy facilitates more efficient utilization of resources could also help drive innovation, while lowering the risks of entrepreneurship.

But there are myriad challenges. The Chinese committee noted that the sharing economy in China will have to improve by tapping into some kind of system of credit and then overcoming regulatory challenges.

“China’s sharing economy is still at the beginning stage, there’s still much space for growth,” said the report.

In many ways, China is a natural breeding ground for sharing economy companies.

The country has a dire need to better use its resources, which include a massive Internet user base, a traditional culture of frugality and many successful examples of how companies can work to shape the future of the sharing economy. On the downside, a large and well-developed bureaucracy could be holding it back.

There are, however, a lot of gray areas.

For example, the crowdfunding of equity for companies is not yet well-understood on the regulatory side, and this approach also challenges traditional notions of consumption and business. There are still issues around how these new businesses can coexist with other models.

The sharing economy should impact the economy from both the supply and demand side, said Lu Wenyong, CEO of Ewashing, an online personal care services provider.

On the supply side, he said, sharing makes it possible to better use resources. On the demand side, sharing of resources can drive consumption. Ewashing works with more than 700 laundry shops to provide on-demand washing services.

“The relationship between the sharing economy and traditional business operators should be friendly,” said Lu.

“They will fuel the development of industries together in the future. The sharing economy can help connect traditional business with the Internet and its users to help promote outstanding enterprises.”

Lu added that the sharing economy develops from a personal level to a company level, then to a national level where sharing cities can be built.

“In another 10 years, the sharing economy will go through another revolution and people’s lifestyles will be completely changed.”

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