China’s sharing economy is on the rise in a big way. The market value of China’s sharing economy reached $680 billion (4.5 trillion yuan) in 2017, and some estimate that this will grow at a rate of 40 percent annually in the next five years. The growth is spurred by several factors, one of which being an increased interest in customized, independent travel experiences in the Chinese tourism market. However, arguably just as important is the growth of the real estate industry in China.
The market value of China’s sharing economy reaching $680 billion in 2017
At a recent United Nations Conference on Trade and Development (UNCTAD) symposium with the theme “Development Dimensions of the Sharing Economy – Learnings from China,” Yang Changle, COO of China’s largest home-sharing company Tujia, noted that his company provides services for 130,000 landlords and operators. However, of that figure, 80,000 operate more than one shared home.
Herein lies one of the most significant advantages that the Chinese market has in promoting the development of its shared-accommodation industry, at least for companies like Tujia. Real estate prices in China have been soaring in recent years, although there is some speculation that the market is slowly “cooling.”
This has led to millions of vacant homes across the country and a seemingly endless rise in the price of homes, despite the fact that housing supply is largely on the rise. There is substantial debate over the exact number of “vacant” homes and what constitutes such a property, although some estimates put this figure at well over 50 million. This, of course, has serious implications for the Chinese economy as a whole and arguably places an unfair burden on consumers, both renters and home buyers who are looking for affordable housing, while others are simply buying as much property as possible and inflating prices.
Some estimates put the number of vacant homes in China at over 50 million
Still, for home-sharing companies like Tujia and Airbnb, it means that are a substantial number of homes out there with landlords and owners to bring in extra income off of vacant properties. Unlike in many Western countries, home-sharing is becoming a more a mainstay source of income for many Chinese homeowners, instead of a supplement income.
It also means that home-sharing companies will have a steady supply of quality accommodations to offer clients and sufficient price competition to keep prices lower and more attractive to potential guests.
Regardless, such a large number of potential hosts also presents additional costs for home-sharing companies. The biggest is quality control and standards enforcement. This means that companies will need to employ an ever greater number of inspectors and quality-control personnel to ensure that offerings on China’s numerous platforms are up to snuff, something that Yang Changle was frank in pointing out as a major challenge for his own company.
Still, if revenue from the shared economy in China continues to grow at the breakneck speeds, it will remain challenging for companies to develop standards for and maintain quality enforcement. However, it also seems that such efforts will continue to prove lucrative.