*4.2. The "Death" of Private Market Forces and the Extension of the State-Owned Programme*

From 2010 to 2015, four companies operated three public bicycle programs. One of them (the orange one) was governmentally founded and the other three (yellow-green and red ones) did not receive any financial support from the government. These companies are referred to as the first round of market force attempts. It was the first time that private market forces dealt with the utilitarian urban cycling issue in a way other than selling and repairing bicycles. They demonstrated the potential of market forces in providing and operating basic infrastructures, which is traditionally the government's responsibility. These market forces and their attempts, however, failed after several years of activity. The yellow program failed first, quitting the market in late 2013 and 2014. The green program, which replaced the yellow program, started to close its stations in central urban areas and shifted its focus to non-utilitarian cycling in non-urban areas in 2015 (Figures 1 and 2). The red program also failed and stopped operating in late 2014 and 2015.

The low-profit margin was the direct reason. In general, public bicycle companies that receive no financial support from the government can earn income from three main sources, as stated by the manager of the ToRide Company:

"The first is rental income—the income from renting bicycles and the loan interest of the deposit; the second is the revenue from advertising—in stations or on bicycles; and the third is the income from some services we provide in our stations, like selling newspapers, snacks and so on" (GZ\_04, 23 November 2015).

The stair-step fee structure and the short-distance nature of urban cycling led to very low bicycle hire profits. For instance, in 2013, one of the public bicycle programs enjoyed more than 25,000 rides per day, but more than 90% were for free (The source of this information is a news report on an online news website *New Economy*, http://www.xinjin gji.net/shangye/2374, accessed 2 May 2017. The link, however, is inaccessible in 2021. In order to ensure the authenticity of the information, we confirmed it to a respondent [GZ-04] who used to be the manager of one of the public bicycle enterprises in Guangzhou). They only earned approximately RMB100,000 from rentals, which is far short of the financial demand for daily operation and maintenance. Therefore, these companies had to develop other income resources and faced many problems in interacting with the government.

**Figure 1.** An Abandoned Public Bicycle Station in Guangzhou (this picture was taken by the first author on 31 January 2016).

**Figure 2.** Abandoned Public Bicycles in Guangzhou (this picture was taken by the first author on 31 January 2016).

The first problem was various strict regulations and policies regarding the building and operating of stations. All these programs depended on the amount and locations of stations that are the nodes for renting and returning bicycles. Most potential income innovations were also based on the stations. Some companies wanted to conduct other business operations to increase their incomes, such as selling food, operating with banks to provide financial services, and receiving deliveries for local residents (GZ\_04, 23 November 2015). However, they suffered many regulatory constraints in making such implementations. For instance, the manager of the yellow program once wanted to conduct retail business in their stations, and outlined the barriers to doing so in an interview with the media:

"It is very difficult. If we want to do it, we need to register in the business sector, but there are many problems. For instance, just the required information of house [address] numbers stumped me. The stations are on the roadside; they have no house numbers. But [the government] does not care—if you do not have one, you cannot apply for the license" [54].

The problems exceed the licensing issue. For example, if the stations wanted to expand or even maintain their business, they required basic resources, such as power and water. Companies faced different situations in different districts.

"To some extent, our destiny depends on the local government's attitude and actions. You know, these things are not big issues that have clear and strict rules, but in general, we face a relatively strict regulation from the government" (GZ\_04, April 2015).

The above quote is also related to the second problem that the companies faced, even the government-funded one (the orange program)—strict governmental regulation of these companies' profitability means. This problem is rooted in the governmental orientation of the public nature of public bicycle programs, regardless of who the provider is. The government imposed strict regulations on the orange program's fee structure and advertising and basically forbade any other business service to guarantee the public nature of this program and "serve the public" (GZ\_23, 19 November 2016). Therefore, as a market program, the orange program experienced heavy losses. The only reason that this program can keep operating is that the government funds it with approximately RMB20 million in subsidies per year (Xu, Wei, Luo, and Deng, 2015). However, the orange program still has financial difficulties (according to "inside information", from 2010 to 2013, the orange program met a loss of about 80 million RMB (GZ\_04, 23 November 2015)) in daily operation and must rely on bank loans.

The other programs had to follow the operational pattern of the orange program to serve the public if they wanted to secure governmental approval. This means they had to use similar fee structures and limited business sources, but with no governmental financial support. Therefore, it is understandable that these companies quickly concluded that they were unable to maintain daily operations. According to the rough estimate of a company manager, from 2009 (2010) to 2013, the yellow-green program lost approximately RMB30 million, and the red program lost a similar amount (GZ\_04, 23 November 2015).

What made things worse for the programs with no governmental funding was that in June 2015, the government decided to extend the orange program from BRT line areas to other urban areas, including those covered by the green and red programs (at that time, the red program was nearly abandoned by the operating company). In the governmental budget adjustment in 2015, RMB120 million in financial aid was allocated to the Public Bicycle Project Promotion Fund. The goal of this fund is to provide 30,000 orange public bicycles in the urban area of Guangzhou, and the long-term vision is to provide 100,000 bicycles with further governmental financial support in the urban area to solve the "last mile" travel problem of the public (Xu et al., 2015). After that, the green program left the urban area and moved its focus to leisure cycling in non-urban areas, and the red bicycles were totally replaced by the orange program. Although the orange program has expanded rapidly, it relies on governmental investment and subsidies for both the initial construction and daily operation rather than achieving profits through market measures. To some extent, it is more of a government-affiliated agency than a market force.

Therefore, by the end of 2015, it seems that the market forces in the area of the public bicycle all failed and quit. Their failure indicates that market forces cannot work well in the utilitarian urban cycling field, which confirms governmental officials' claims that this field pertains to a public issue that "relies on the government" [55]. Things, however, do not end here. In the same year that the red program died, and the green program quit, another round of market force attempts with a new generation of public bicycles emerged in major cities in China, including Guangzhou.
