What government can do to boost sharing economy?

By Ma Liang

The past year has witnessed the unprecedented flourishing of bikesharing, car-sharing, and other sharing economy industries, with the influx of billions of venture capital, thousands of entrepreneurs, and millions of job opportunities. Given China’s economic slow-down and environmental deterioration, it is imperative to transform the economy from the existing resource-dependent and export-orientated regime to an innovation-driven and ecologically sustainable mode. The emerging sharing economy resonates with national policy of “mass innovation and mass entrepreneurship,” and should be strongly supported by the government.

Sharing economy is characterized by public crowdsourcing platforms, on which products, services, skills, and time can be shared among members. It helps to ease service access, reduce private ownership, and facilitate mutual benefit. Equipped with mobile payment and flexible parking, for instance, bikesharing services brands such as Mobike and ofo are warmly embraced by their users. Users can easily search and return bikes in the vicinity by their mobile phones, which help to connect the dots in commuting and transferring across different transport modes (e.g., bus and metro).

Car-sharing is still in a pilot stage, but its promise in capping private car ownership, reducing carbon emission and mitigating traffic congestion cannot be underestimated. The boom of sharing economy is believed to restructure transport and related industries, and contribute to green development and job creation. Sharing and interaction among strangers also fertilize mutual trust and social capital, which is pivotal to social stability and harmony.

It is not unusual for sharing economy to encounter controversies and obstacles due to its novelty and threats to existing industries. Take the case of bikesharing, it is considered illegal or inappropriate by urban management agencies in some cities, because it is a nightmare to public managers accustomed to control and regulate.

Bikes are parked disorderly by egocentric users on the road, without reciprocal respect to next peers. Bikes frequently suffer from vandalism, appropriation, wreck, and stealing, and they are occasionally kept for personal use. People working in the field of bike parking and renting is threatened to lose their jobs, and they respond by taking vengeance on innocent bikes. Latecomers simply copy and emulate pioneers’ product design and business model, which may impede original innovation in the industry in the long term.

These phenomena, however, are not uniquely Chinese characteristics. And they cannot be simplified to the lack of civility and elegance among Chinese. Once the first generation of public bike program was experimented in European countries at the end of last century, similar problems frequently occurred and finally killed these pioneers in this field. It is only until the advancement of new information technologies that finally helped the spread of bikesharing programs.

Instead of attributing the problems encountered by sharing economy to low population quality, it is more helpful to conceive workable measures to facilitate its maturity. Given the strategic importance of sharing economy to China’s future transformation, government must adopt multi-pronged measures to support its development and address concerns among entrepreneurs. To boost the healthy and sustainable development of sharing economy in China, it is crucial for government to pay attention to at least four aspects.

First, sharing economy as an innovation is a course of risk-taking with high uncertainty and vulnerability. Without government support in intellectual property protection, malicious competition and intentional emulation will heavily prevent entrepreneurship and long-term investment. Government should develop a robust social creditability system, which equips users with self-discipline and reciprocity. The rule of law must also be prompted to create an innovation-friendly institutional environment. It is also pivotal to pay special attention to those who lost benefits from sharing economy, because so far it is still not a win-win situation for the whole society.

Sharing economy is embedded deeply in internet and other cutting-edged information technologies, and it cannot be possible without secure and free cyberspace. Government must strengthen internet security and safety to retain citizen trust in sharing services. Citizens often submit personal data and transfer money when using sharing services, and they are reluctant to do so without internet security. To boost the development of sharing economy, government should secure citizens’ private information and financial transaction through online services.

Second, government can improve digital government services to facilitate and catalyze innovations in sharing economy. Sharing economy relies heavily on open data (e.g., geographic, transport, financial, and personal identity information) from various government agencies to consolidate and update service platforms, and it is helpful to open more digitalized and interconnected data to inspire new ideas in sharing economy.

Since government data largely sprawl across agencies, it is particularly important to streamline information sharing, data exchange, and functional interoperability across governments at different layers, agencies and regions. Government can also boost sharing economy by advancing user-centric “Internet + government services,” which can ease business registration services and strengthen government responsiveness by online and mobile features.

Third, government could collaborate with entrepreneurs to coproduce innovative public services through sharing economy. Corporations in the field of sharing economy are social enterprises in nature. Although their ultimate aim is to pursue profits, they fulfill social purposes with innovative business models. Government should collaborate with these enterprises to use public-private partnership (PPP) to supply sharing services. These entrepreneurs build public platforms and ecosystems for medium-and-small-sized internet enterprises to develop new features and applications.

Sharing services should not be monopolized by the government, and it is usually just government failure in successfully delivering quality services that gives birth to sharing services. Instead of developing everything from the scratch or replacing these entrepreneurs, which is usually costly and ineffective, government could smartly partner with these companies to develop and deliver sharing services.

Last but not least, the education system must be significantly reformed to respond to the urgent needs of economic transformation. Chinese is not without creation and innovation, but the current exam-oriented education system substantially destroyed the talent foundation of sharing economy.

If you watch a CCTV-2 program called “I love invention,” you’ll be amazed by brilliant ideas and creative inventions generated daily by ordinary Chinese. As Qian Yingyi, an economist at Tsinghua University says, our education system is characterized by a high mean (average level of knowledge and skills) albeit a low standard deviation (variations among students).

Similar to other East Asian countries, our students follow the same pattern and are equipped with solid knowledge foundation. However, they are so familiar with model answers that few outliers and geniuses generate. Ironically, it is usual that students who cannot find decent jobs become entrepreneurs, because qualified students are more welcomed by employers.

The education system must be reformed to include entrepreneurship and innovation modules, which prepare students to learn about knowledge and skills of entrepreneurship. With more and more qualified people pursuing entrepreneurship and innovation, sharing economy will attract more talents and create more opportunities.

The author is an associate professor at the School of Public Administration and Policy and a research fellow at the National Academy of Development and Strategy, Renmin University of China, China.