In Wuhan, capital city of central China's Hubei Province, there used to be a dozen bike-sharing platforms offering services, but now only Mobike and Hellobike bicycles can be easily found.

"Abandoned shared bikes have become city 'rubbish,' blocking the walkways and tarnishing the city's appearance," Chen Lu, an office worker in Wuhan, told Hubei Daily.

According to a report by the newspaper, the number of shared bikes in Wuhan has decreased from 1.03 million in 2018 to the current 750,000.

In July, the Wuhan Traffic Management Bureau announced that Ofo, one of the largest dockless bike-sharing startups in China, had ceased operation in the city. Ofo has been suffering financial stress since the second half of 2018, with nearly 16 million users waiting for refunds. The company's total debt is estimated to be more than 3.6 billion yuan ($513.54 million).

An example of the sharing economy, the bike-sharing business is experiencing a decline after explosive growth. Worse still, several other sectors of the once robust market are also cooling down, causing widespread concerns about their profitability prospects.

Bright spot fading

Investors were the first to retreat from the industry. According to a report on China's sharing economy market released by the State Information Center (SIC) in March, although the transaction volume registered a year-on-year growth of 41.6 percent to more than 2.94 trillion yuan ($415.8 billion) in 2018, the direct investment in the sector totaled 149 billion yuan ($21 billion), a decline of 23.2 percent over the previous year.

"The sharing economy, including bike sharing, was widely used by the public mostly because the service providers were believed to be utilizing idle resources at low cost," said Jiang Zhaoxiang, an independent financial commentator, in an article in The Beijing News. "This new model was expected to provide highly feasible and revolutionary paths for sustainable development, which could also help reduce pollution caused by excessive energy consumption. However, some companies seem to have turned away from this purpose and are causing very serious waste instead of saving resources."

Bike-sharing platforms, for example, are choosing to simply increase prices, instead of attracting advertising revenue or improving services to lower cost and increase profit. This indicates that they are not yet able to establish core competitiveness and that venture capital funds are too eager for quick success and instant money, Jiang said.

"Along with being unable to find suitable profitability models, a more important reason for the downtrend of the bike-sharing sector is that it has not yet established new technologies as a driving force. When the digitalization trend is replaced by the new economy represented by new retail and new finance, the concept of sharing economy also needs a revolution," said Meng Yonghui, an independent financial commentator, on his blog.

He pointed out that many service providers in the market, who don't really understand the essence of the sharing economy, are just taking advantage of the Internet to launch and promote their business.

What is needed is to satisfy new user demand by providing more innovative solutions, Meng said, adding that the Internet can provide users only with more convenient access to products and services, but the sharing economy must change traditional industries to meet the upgraded user demand.

Along with mobilizing as many idle resources as possible, the challenge lies in how the sharing economy enterprises will really add value to these resources, according to Meng.

Manufacture-sharing rises

Despite the failure of a large number of sharing economy startups, many analysts remain optimistic about the market's long-term prospects.

The market size of China's sharing economy is expected to exceed 9 trillion yuan ($1.28 trillion) in 2020, compared to the current 7.36 trillion yuan ($1.05 trillion), according to a recent report from iiMedia Research, a Chinese firm specializing in data analysis service for new economic industries. The number of market participants totaled more than 760 million in 2018, including about 75 million service providers, it showed.

China's sharing economy covers a wide range of fields, from life services such as travel and accommodation to industrial production, agriculture and other production. So, which is the most vigorous one? According to the SIC report, sharing production capacity in manufacturing industries has become a new growth point. In 2018, the growth of production capacity sharing soared 97.5 percent year on year, the fastest in all sharing economy sectors.

The Shenyang Machine Tool Group Co. Ltd. set up a smart factory at an industrial park located in Shiyan City in Hubei, providing sharing services for intelligent manufacturing. By leasing machine tools via the Internet, startup enterprises can share expensive equipment and process their own spare parts.

The SIC report said as the infrastructure for sharing production capacity improves, it will become an important orientation for the innovative development of enterprises, offering the possibility of manufacturing without having to build self-owned workshops.

"By connecting China's advantages as a manufacturing power and an Internet power, sharing production capacity will greatly improve resource utilization efficiency, reconstitute the supply-demand structure and industrial organizations, and facilitate the development of micro, small and medium-sized enterprises," the report said. "As manufacturing industries become more Internet-based and intelligent, sharing production capacity will also play a more significant role in stimulating innovation and business startups, nurturing new business models and advancing supply-side structural reform."

The SIC estimated that in the next three years, the average annual growth of the sharing economy will go beyond 30 percent.

"Since the sharing economy is a combined innovation model integrating technologies, systems and organizations, it will significantly reduce costs by seeking partners, bargaining and ensuring the safety of transactions for both the supply and demand sides, and improving resource allocation efficiency. The sharing economy is far from fully playing its role, thus, the trend of its penetration in various sectors of the economy will remain unchanged," the report concluded.

Copyedited by Rebeca Toledo

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