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What are China’s ambitions for the Metaverse

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Analyzing today’s investment into blockchain, you probably already know that China is one of the countries investing the most into the ‘space’. This news shouldn’t surprise you. Except when you consider that blockchain will be incremental to the development of the metaverse and Web3. Something that the Chinese are investing in heavily too. TikTok’s ByteDance, Tencent, and Alibaba are just some of the Chinese firms with ambitions for the future.

In the U.S., Morgan Stanley predict that the metaverse and related investments could be worth more than $8 trillion. The firm also predicts that this number is similar in the case of China’s metaverse market. You just may not have heard so much about it.

Today we wanted to share with you what some of those investments are and why should you know about them. One needs to consider how there is still a large section of society who haven’t accepted that the metaverse is imminently going to be arriving in a VAR headset near them. Perhaps some of the investment amounts in this story will be sufficient in changing their perception.

Blockchain before Metaverse

Last year the European Union Institute for Security Studies released a report about China’s blockchain and cryptocurrency ambitions.

The report links China’s appetite for all things distributed ledger to the launch of the 13th five-year plan put in place by the Communist Party of China in 2016. It was at this time that the first White Paper on Blockchain Technology and Application Development was published. Several other white papers have followed since, and blockchain is mentioned in numerous initiatives since then too.

Interestingly a centralized government exploring a technology that is decentralized in nature seems to be a paradox in itself. But there is method behind what the Chinese are doing. Just consider the digital yuan or e-CNY:

President Xi Jinping has gone further than many other political leaders when it comes to blockchain. CNBC reported a speech given by Xi from 2019 where he said that blockchain is an “important breakthrough in independent innovation of core technologies.” The speech even led to a rise in the price of bitcoin at the time.

There is also China’s own blockchain-base service network, or BSN. A platform that has stipulated the difference between permissionless (or decentralized) and permissioned (owner set). The concern is that with this type of so-called permissioned blockchain, that it is not entirely a blockchain anymore.

“There is a fundamental incompatibility between China’s stated ambition of supporting a domestic blockchain development ecosystem and the decentralized nature of blockchain technology,” Garrick Hileman, head of research at Blockchain.com, told CNBC in May.

China’s International Blockchain Ambitions start with Smart Cities

The Digital Yuan and BSN are just a start, today things have moved on significantly. You may recall how the Chinese Government made the Digital Yuan a technological showpiece of the 2022 Olympics in Beijing. Hailed by some as the “most high-tech Winter Games”, Beijing flaunted its credentials as a smart city for all to see.

In 2011, China’s 12th Five-Year Plan announced the development of “digital cities” as a national priority. Chinese smart cities can also be defined as “urban areas that collect large amounts of information and use it to enhance city operations”.

At #DisruptionBanking we have mentioned the Hong Kong Greater Bay Area several times in our stories. However, we have, as yet not covered the “Beijing-Tianjin-Hebei Integration Plan”. A plan that involves 100 million citizens of China in a geographic region twice the size of South Korea, covering 10% of China’s GDP and 8% of China’s population. Familiarly known as “Jing-Jin-Ji” or the “capital economy circle” the project aims to integrate Beijing, Tianjin, and Hebei. A region that has already adopted much of the infrastructure needed to be considered a ‘smart city’, although it is actually 13 cities.

Last month, the 15th China Smart City Conference took place in Beijing, further highlighting the importance of Jing-Jin-Ji. One of the winners of the award ceremony that took place during the event was Freedo. The company uses artificial intelligence to integrate real and virtual data for developing digital twin models of cities. A technology that China needs in order to create further smart cities in the future.

A few weeks before the conference an official from the Beijing Municipal government stated at a press conference that the city has now transitioned to the Smart City 2.0 stage. Interestingly, outside of all the autonomous driving and data initiatives, the Smart City 2.0 concept now includes a metaverse experience center.

The search for the Chinese Metaverse “Yuan yu zhou”

Last October a new Metaverse Industry Committee was put in place by the state-backed China Mobile Communications Association. Some observers shared how China’s metaverse efforts were lagging those of the U.S. or South Korea, but the initiative created the desired effect leading to over 140 members signing up since inception.

Last year the market size of China’s virtual reality industry, for instance, exceeded 100 billion yuan, or around $14 billion. And is expected to rise to $50 billion by 2026. All types of ‘reality’ are essential elements of the metaverse. However, much of the focus, for now, appears to be on the ‘industrial metaverse’ as opposed to a pure gaming experience. A spokesperson for the Ministry of Industry and Information Technology has stated that there are more than 10,000 enterprises engaged in VR and allied businesses today in China.

An example of the innovation in the ‘industrial metaverse’ is how Chinese internet giant Tencent is working with Ruitai Masteel New Materials Technology. Building a digital twin factory that can carry out simulations and virtual testing before manufacturing of them takes place.

Tencent has also embedded Unreal Engine, the world’s second largest video game engine, into its messaging platform QQ. The Chinese tech giant, which owns WeChat, is also a shareholder in companies with metaverse potential such as Snap, Roblox, and Activision Blizzard.

Others with skin in the game include ByteDance, the owner of TikTok, Alibaba, Baidu, NetEase, and Kuaishou. Many of them have already given users the ability to use avatars. Regulation hasn’t sated the appetite for innovation.

To make matters even more compelling, on the 1st of November the Ministry of Industry and Information Technology in China released a 4-year action plan. It may not mention the metaverse outright, but the action plan talks about augmented reality, virtual reality, and mixed reality experiences. It goes further and describes the need for 5G and artificial intelligence, as well as how a virtual reality experience will be essential to sustain China’s competitiveness. All of these technological advances are essential to the infrastructure of the metaverse.

How important is the Metaverse for China?

#DisruptionBanking asked Zahid Ali, who works with companies and organizations from China to Dubai, to help shed light on the matter. Partially because the President of China has been active in the Middle East, but also because there is a substantial amount of investment into smart cities and therefore blockchain in the region.

Zahid explained how cryptocurrencies, tokenization, and blockchain are all parts of the infrastructure of the future. How some in society believe that these innovative technologies are about decentralization and power to the people. But how there are others who believe they are about centralization and taking power away from the people.  

“China will be one of the core foundations of the future,” Zahid explained. “And China is looking to the future. A future which will involve blockchain and cryptocurrencies.”

On December 8 Chinese President Xi Jinping and King Salman bin Abdulaziz Al Saud signed a ‘comprehensive strategic partnership agreement’, or a lot of agreements in fact. The Saudi Press Agency reported the same day that China and Saudi Arabia had signed 34 investment agreements covering sectors in green energy, green hydrogen, photovoltaic energy, information technology, cloud services, transportation, logistics, medical industries, housing and construction factories.

Huawei were one of the biggest winners of the agreement gaining a $30 billion contract to bring cloud computing to the Kingdom. This would undoubtedly include supporting the development of NEOM, the Saudi Smart City, which we wrote about recently.

China’s metaverse ambitions are not going to be solely focussed on its own domestic market in the future. There are bigger ambitions that Xi Jinping’s visit to Riyadh showed the world. To highlight the point, it’s the Chinese Presidents third international trip since COVID restrictions were dropped.

How many more of these trips will he be able to make in the metaverse soon? And where next?

Author: Andy Samu

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