Risk Watch: Chinese Online Property ‘Unicorn’ Aiwujiwu Shuts Down

◎ The collapse of Aiwujiwu and pinganfang.com suggests that the business model of “property + financing + internet services” is failing in China.

Aiwujiwu, the Chinese online property listings platform and “unicorn,” had ceased regular operations as of the end of January 2019, according to mainland news reports. The company is in a liquidation phase, and services are no longer available on its website (www.iwjw.com) and app.

Another online property platform, pinganfang.com, also ceased operations in January (Jan. 11) and stopped services on its website and app. Accessing pinganfang’s website or app redirects to the homepage of Ping An Urban-Tech.

The backdrop:
1. Established in March 2014, Aiwujiwu once earned the tag of “the fastest growing unicorn in the industry” and was highly sought after by prominent investment institutions. It raised five funding rounds in 18 months, obtained nearly $300 million, and saw its valuation rise to $1 billion.

Aiwujiwu styled itself as a “property agent” for the internet age. In 2014, it used the slogan “get rid of traditional agents.” In 2015, it carried out the second-most second-hand property transactions in Shanghai. Five years later, however, Aiwujiwu fell from its peak.

2. The Ping An Insurance Group established pinganfang.com in March 2014. The company describes itself as being in the business of posting new housing listings, housing rentals, housing financing, and other related services. In 2015, pinganfang.com claimed the 32nd spot on Forbes’s Global 2000 list.

Our take:
1. In our China 2019 outlook, we noted that “there is a possibility that big Chinese tech companies (not including Baidu, Alibaba, and Tencent) could collapse in 2019.” The shut down of Aiwujiwu and pinganfang.com affirms our prediction.

The collapse of Aiwujiwu and pinganfang.com suggests that the business model of “property + financing + internet services,” which became popular in 2014, is failing in China. This could foreshadow a decline of the so-called “Internet Plus” economy (applying the internet and IT to conventional industries).

2. The “Internet Plus” economy promoted by the Chinese Communist Party is turning out to be more illusory than a workable model of innovation for the economy. In fact, the “Internet Plus” economy hides the serious worsening of China’s real economy. We believe that the “Internet Plus” bubble will inevitably be squeezed by pressure from the Sino-U.S. trade war.

China’s peer-to-peer (P2P) lending platforms are a derivation of the “Internet Plus” concept. However, many P2P platforms have since turned out to be internet fraudsters. The collapse of P2Ps last year have created millions of so-called “financial refugees,” and the protesting “refugees” have created additional headaches for the CCP.

3. We believe that China’s economy will see a severe downturn in 2019, particularly in the second half of the year. More prominent Chinese tech companies could collapse.