China's bike-sharing firms continue to attract investment amid government support

A man using the ofo bike-sharing app to rent a bicycle in Shanghai. Photo: Imaginechina

China's fledging bike-sharing firms have succeeded in drawing interest from the venture capitalists amid the cooling of investment in other sharing economy startups, largely due to the endorsement of the country's local governments.

Beijing-based bike-sharing startup Mobike has obtained the latest strategic investment from Foxconn, an Apple supplier, of an undisclosed amount. The deal came only three weeks after Mobike completed a $215 million series D financing round led by Tencent and Warburg Pincus.

Media reports said that the Chinese bike-sharing companies have so far scooped up investment of tens of millions of dollars from dozens of institutional investors.

The investment spree in the bike-sharing industry comes at a time when some Chinese cities are planning to introduce industry rules and regulations to standardize the booming sector in their push to promote clean travel.

Shenzhen is the pioneer in reining in the unregulated bike-sharing market by sketching out rules in December, which defined the obligations and responsibilities for the service providers and users amid concerns over illegal parking and travel safety problems.

In the draft regulation, the Transport Commission of Shenzhen Municipality expressed its support to the bike-sharing service providers, vowing to create a sound business environment for the development of the nascent industry.

At the same time, it also required that the bike-sharing firms must set up a special account for cash pledge that should be supervised by a third-party institution, purchase third-party liability insurance and personal accident insurance for their users, publicize the charging standards and report the numbers of their users and bikes and the distribution information and use frequency of the bikes to the related watchdogs.

The Internet-driven bike rental business is "bringing revolutionary changes to the bike-enabled travel market", said Shenzhen's transport commission at a press conference in December, adding that the draft regulation will contribute to boosting the "healthy development of the industry".

The southern Chinese city's preference for the eco-friendly bike-sharing service strikes a sharp contrast to its attitude toward the ride-hailing business in 2013, when the city was initially reluctant to legalize the taxi-sharing companies, leaving them to operate in a gray zone.

Beijing, the Chinese capital notorious for its intractably bad air pollution, has joined the rank of Shenzhen. On the eve of the Chinese Lunar New Year, the Beijing Municipal Commission of Transport raided the offices of Mobike and its archrival ofo and made a field investigation on the outdoor places where the two companies deploy their bikes.

The capital's transport commission is also mulling regulatory rules to normalize bike parking on the already crowded streets, and calls for the use of big data by the bike-sharing companies as part of its efforts to update the low-speed traffic system and build more parking bays for bicycles.

Management of freewheeling bike parking has been put on the top of the Beijing government's agenda, as Vice Mayor Zhang Jiandong highlighted at the city's annual legislative meeting in January that it was high time to "solve the bike parking problems". He further pointed out that the government will build more designated bike parking lots near the eligible subway stations and transport junctions.

Zhu Dajian, an urban development expert from Tongji University in Shanghai, which is also drafting rules for the bike sharing industry, attributed the phenomenon of pell-mell bike parking to the lack of public parking zones.

He suggested that the local governments should for the time being lay stress on clearing up the "zombie" bikes on the streets (referring to bikes out of use) in order to create more space for bike parking. The method is now widely used by universities and works well in the campuses.

"But it needs the supervision of the related government agencies and the participation of the bike-sharing companies and users," noted the expert.

According to Rong Jun, the spokesperson of Beijing's transport commission, the city's government will "resort to technological means to standardize bike parking". Electronic fence is a feasible approach, which forces users to leave bikes in the designated areas after use, otherwise, they are unable to lock the bikes and complete the payments via their mobile phones.

However, allowing users to leave the bikes wherever they like is the biggest selling point of the bike-sharing apps, which is totally different from the government-run bike rental platform which designates fixed parking places, sacrificing the convenience.

Anyway, many bike-sharing companies have welcomed the pending regulations. 

Mobike has pledged to strengthen its cooperation with the local governments to set up more special bike parking zones. "We attach importance to the problems brought by the freewheeling parking, and are willing to work with the government to deal with them," said Mobike President Hu Weiwei.

In a recent research report, consultancy firm BigData said that the Chinese bike-sharing market was seeing rapid expansion in 2016, estimating that the users of the bike-sharing apps are expected to hit the 50 million mark by 2017. As of the end of 2016, the number of users of bike-sharing apps was 18.8 million, said the report.

Mobike and ofo are also making inroads into more cities across the country. The two apps together occupied roughly 90 percent of the Chinese bike-sharing market in 2016, said the report. The two are also eyeing overseas markets.

What's more, the government's support for the bike-sharing sector could come down to fears over the deterioration of smog, which is mainly caused by vehicle exhaust emissions.

Rong said that the Beijing government has long championed the concept of green travel characterized by cycling and hiking.

Previously, there were reports saying that Beijing will build more lanes exclusively used by bikes in its efforts to improve cycling infrastructure.

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