Beijing 'to tighten deposit rules' for bike-sharing providers

Regulations for bike-sharing are tightening, with the Beijing Municipal Bureau of Financial Work proposing recently that bike-sharing companies registered in the city must put consumer deposits into a designated bank account, financial website Caixin reported on Sunday.

The deposit issue has raised concerns among consumers as to how the companies manage the money and how refunds are obtained.

Of 2,011 respondents in a recent survey, 65.8 percent expressed support for a deposit-free mode for shared bicycles. They expressed concerns over deposits, citing difficult returns, the possibility of money diversion and high amounts, according to a news report of ifeng.com on Thursday.

"Bike-sharing companies do not have ownership of the deposits, so they cannot use the money for lending or investment, otherwise they will be involved in illegal funding," an official from Beijing Municipal Bureau of Financial Work was quoted as saying in the Caixin report.

Fu Jun, an investor in the Ofo sharing-bike company, said that "some companies take advantage of the deposit mode to rapidly expand their capital scale" by delaying the process of refunding deposit to consumers, according to the Caixin report.

Ofo and Coolqi are the two bike-sharing companies registered in Beijing. "The deposits of Ofo are put into China CITIC Bank for this specific use only, without any other purpose," a public relations representative of Ofo told the Global Times on Sunday.

Coolqi could not be reached for comments as of press time on Sunday.

The development of the industry is likely to reach a bottleneck if the deposits are strictly regulated, an industry insider said, noting that many bike-sharing companies can't cover their costs if each bike is covered by only one deposit, according to the Caixin report.

The profit pattern of bike-sharing companies is based on built-in leverage and the scale effect, and tightened deposit regulations could threaten that, the report said.

It noted that these companies do not only have costs in terms of purchasing bikes but also in their operation, maintenance and depreciation.