Reinventing the wheel: Chinese cycle scheme wins innovation race

Public and private bike-shares are battling it out in urban spaces. Both models can coexist, says award winner

A Chinese city-wide bike-share has won a leading international prize for its outstanding contribution to green energy. Hangzhou Bicycle Service won the 2017 Ashden Award for Sustainable Transport at the ceremony in London on June 13.

We caught up with deputy general manager Wu Guoxiong (吴国雄) on why the scheme is outperforming those in London and Paris; the new competitive threat from the private sector; and his views on the future of urban mobility in China.

CM: For the last 30 years Chinese cities have been designed to meet the needs of car owners. Is the rapid uptake of public bike schemes pioneering a new approach to urban planning?

WG: These days people consider bikes a low carbon mode of transport and they want to do their fair share to improve the environment and make a contribution. In China, the government has taken this mind-set into consideration by incorporating a “slow lane” (specifically for bikes and e-bikes) into its urban design. Hangzhou is already doing this along with a few other cities where public bike schemes are well developed.

CM: Cities in Europe and the US have their own public cycle schemes but none match Hangzhou in terms of size and popularity. Since launching in 2009, why has Hangzhou Cycle become the world’s most successful scheme?

WG: Fundamentally, this is due to its positioning as a public interest service. 96% of all rides made through our cycle scheme are provided for free. Our cumulative number of rides has reached over 700 million, which has created a big positive social impact.

Looking at the other reasons, first, the top government level paid a lot of attention to the project’s development including the technology side. Back in 2007 the Hangzhou government visited Paris and learned a lot about cycle systems. Although we were the first in China to launch this scheme we were not the first in the world.

Second, we conducted a thorough feasibility analysis at the beginning of the project based on the culture of Hangzhou city. The project was linked to the city’s future development plans and tested for compatibility.

Third, from the start it has been fully integrated into the city’s public transport system. It also benefitted from policy support from the local government of Hangzhou. The business model is also a key element of its success. Although the positioning of the scheme as a public interest [intiative], it does not cost taxpayers a penny to run. [After the initial phase] the project was given to a responsible enterprise (state company the Hangzhou Public Transport Group) to run it commercially and that ensured its success.

When you give a project to a company their ultimate goal is to maximise the profit and that is sometimes at the cost of the public interest. Hangzhou made a good balance between these two models.

CM: To what extent is the government still subsidising the scheme and how much profit does it make per year?

WG: The government only provided the cost of the initial construction of the kiosks, service points and the bikes themselves. Over nine years we managed to make good use of these resources through advertising – one channel of revenue for us. The other channel of revenue is that we are a shareholder of another company that provides technology and services to other bike shares in China (in over 200 other cities). We turned over 90 million yuan (US$13.2 million) last year enough to cover the running cost of the scheme itself with a small profit left over after overheads.

CM: How much did the government put in initially and when did the company become profitable?

WG: The government put in 300 million yuan; we started turning a profit from 2010.

CM: There has been an explosion in commercial cycle apps such as Mobike and Ofo, which are going global. Just this week Mobike launched in Manchester, England. What are the pros and cons of this private sector model?

WG: Private bike sharing began to appear in 2014. In 2015 we saw two big players emerge: Mobike and Ofo. 2016 was an explosive year for private bike-share schemes. Now we see the market overrun with 30 companies all competing with each other.

It has created a big impact on society; some of it good but most of it bad. The most obvious problem it has created is the violation of people’s road rights. When we started to roll out our bike scheme we had to make sure that the road rights of others were not being violated. For example, we only build collection points on pavements that are at least 3.5 metres wide. This way we can ensure that the road is not blocked. But with this new type of private share you can park anywhere.

We have seen reports of traffic accidents happening because of this, especially in areas where pavements are quite narrow. Parked bikes make it difficult for the elderly and the blind to use the road properly.

The other problem with the private schemes is that they do not create a balance between supply and demand. In Hangzhou we did very careful market research and concluded that 85,800 bikes were enough to service the city (with an average daily use of five times per bike). However, the private schemes have added a lot more bikes, far beyond the number needed.

They do not consider how to use the under-utilised resources in society which is what the real shared economy should do. Without proper controls, in the future, they will create a huge waste of social effort and resources. We are already seeing this in many cities where bikes are just dumped in places where people don’t go to.

Another problem with private schemes is the use of deposits. Users should, in theory, be able to withdraw their deposit at any time but a lot of companies use the deposit to invest or reuse it in production. It would be a real risk if companies made bad investment decisions and lost the money.

Some [local] governments in China have started putting controls in place in terms of the total number of bikes, the use of deposits and safety standards. And they have also started to think about the personal information that these companies hold through their apps.

CM: Mobike claims to have reduced congestion in Beijing by 7.4%. Do the reductions in traffic pollution outweigh the negative social impacts of these apps?

WG: The private sharing bikes schemes started in cities where there are none or very limited bike schemes. Mobike and Ofo started in Beijing and Shanghai and later moved to Guangzhou and Shenzhen because these cities have a real need, especially around metro stations and shopping malls.

We cannot deny the contribution that these schemes have made in energy savings and emissions reductions. But there is a question over how much responsibility the government should take and whether it is a good idea to allow the market to decide for itself.

CM: Are we witnessing a decisive shift away from a “planned economy” model towards a more market-led approach?

WG: I went to Beijing to observe how the private bikes are used. I think the problem there is that the private cycle schemes do not have dedicated companies to oversee the commercial development and maintain these bikes properly. Most of these bikes are old and in a very dilapidated state.

I think the answer would be for the government to take the initial lead in establishing the system before handing over to a responsible company to run and operate the scheme.

There is still space for these schemes to co-exist in China.

CM: What is the government doing to regulate this new market?

WG: Under the order of Premier Li the Ministry of Transportation has already issued guidelines on the management of hired bikes. Local governments followed by putting in place their own more detailed regulations to ensure that users’ rights are safeguarded.

Hangzhou’s new regulations are expected to be adopted by the end of the month.

CM: What other urban mobility trends are there that could transform life in China’s cities in the near future?

WG: The first trend is the bigger and faster development of “track transport” like the subway here in London. This is happening in China where underground systems are being built rapidly. The second is the bigger and better use of public bicycle schemes because they are still a very low carbon and environmentally-friendly option.

Thirdly, which is what we are focusing on, is incorporating energy sharing within the public cycle system to make cities better places to live in.

We are doing this by making use of service points and turning them into new energy collection and distribution points. We are able to fit our bikes with detachable batteries to assist with pedalling so riding bikes will be a lot easier. In this way we can extend the original range of an average journey from under three kilometres to 3-10 kilometres.

Bikes will no longer just be a supplement to other modes of transport but become a replacement for cars and buses themselves.