KITA News and Reports
  • Localized Sharing Economy in China emerges as Growth Engine to Lead Chinese Economy
    2017-05-15

    Localized Sharing Economy in China emerges as Growth Engine to Lead Chinese Economy

    - Korea needs to consider Korean sharing economic services and platforms -

     

    It is argued that Korea needs to discover future growth engines in the rapidly growing China's sharing economy and that Korea is also required to actively explore localized sharing economic services.

     

    According to a recent report titled "The current status and implications of China's sharing economy development" issued by the Chengdu Center of the Korea International Trade Association (Chairman, Kim In-ho), the market size of China's sharing economy reached 3,452 billion yuan (approximately 590 trillion won) as of the end of 2016, showing sharp growth of 103 percent year-on-year. The service market inspired by the overseas sharing services such as Uber (car sharing), Airbnb (accommodation sharing), etc., has been dominated by localized platforms, including Didi Chuxing and Tujia. This market is significantly contributing to job creation as the number of employees working for the sharing economic platforms is estimated at 5.85 million, and the number of service workers is estimated at more than 60 million.

     

    In particular, the size of the transportation service sharing industry, including vehicle sharing, doubled within a year as it increased by 104 percent from the previous year to 203.8 billion yuan at the end of 2016. The total of 238,400,000 people, that takes up 14 percent of the total jobs created by Didi Chuxing, the representative car sharing service, in 2016, were transferred from the declining industries (coal, steel, etc.) restructured by the Chinese government. It is regarded as a successful example of so-called "supply side reform".

     

    In general, shared economy refers to transportation services such as shared cars and shared bicycles. However, China's shared economy is not limited to those services. In China, sharing service means ‘to share anything that can be sharable’ as a variety of products and services such as knowledge / content sharing, housing sharing, living services (cooking and technology), funds and production facilities are subject to share. 

     

    China has already recognized the sharing economy as a growth engine that will lead the next generation of Chinese economy, and appears to work on active policy support and drastic regulatory reform. The sharing economy is not about a simple relationship between a company that unilaterally supplies goods and services and a consumer who unilaterally consumes them. It is composed of three platforms: a platform (a shared economy company) that plans and manages services, an 'employee' who provides services belonging to the platform, and a 'consumer' who uses the services. Therefore, the economic effects appear in various ways. For example, in the case of car sharing service Didi Chuxing, the platform itself creates employment, and the employee (driver) who provides the service directly to the consumers also gets a job. As the driver can freely work for other platforms, they are able to secure higher employment stability and independence. In addition, consumers can enjoy a variety of services at lower cost.

     

    The report points out that China’s sharing economy is becoming a growth engine to lead China’s economy in spite of the limitation that existing economic indicators such as the conflict between the existing law and the next-generation new industry caused by the rapid growth of China's sharing economy, the risk of customer information leakage, and GDP are not able to properly measure the impact of sharing economy. It also asserts that Korea needs to focus on building an infrastructure for sharing economy, for instance, spreading fast and convenient mobile electronic payment system like China’s Alipay and Wechatpay.

     

     

    Lee Won-suk at Chengdu Center of the Korea International Trade Association said Since Korea’s mobile Internet environment has already developed, the country has a favorable condition for the expansion of the sharing economy. Therefore, there will be more sharing economic platforms utilizing Korea’s characteristics. He also stressed There are critical challenges for the government and the industry to establish a social apparatus that guarantees the employment stability of related workers, and for consumers to recognize the provided services as a kind of public goods and use them carefully.

     

     

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