Are China’s Sharing Start-Ups Playing With Fire Using Customers’ Money?

China's mushrooming bike sharing companies have aggregated RMB6 billion (US$872 million) or more in user deposits, according to industry observers. These deposits, growing everyday and currently existing in a regulatory vacuum, may be partially used for high-yielding investments and in turn present massive financial risks to consumers.

Beijing-based bike sharing company ofo said that the deposits it has taken from users, roughly RMB2.5 billion (US$363 million) by analyst estimates, remains intact on the company's accounts. Ofo founder Dai Wei said that the company is waiting for regulatory guidance on how to define and handle these cash assets.

As bike sharing is a completely new phenomenon, there are currently no regulations overseeing its management. These deposits, paid by users when they borrow a bike for a short period of time, are dif...

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