Ramzi Chaabane
Jul 29, 2022

Is the Chinaverse ready to take over the world?

China seems to be developing a whole new offer for the metaverse, just as it did with web 2.0.

Baidu's XiRang initiative can be considered as an SaaS for the metaverse.
Baidu's XiRang initiative can be considered as an SaaS for the metaverse.

Social networks, streaming services, and video game platforms are already intertwined in the 'Chinaverse'. The China metaverse, though, is notably distinctive from its western counterpart as it depends on a centralised, private blockchain that is owned by the Chinese government.

In recent months, a lot of China-based businesses have entered the metaverse journey. An idea of the interest from Chinese companies, the term 'metaverse' has already been used 16,000 times in trademark applications received by China's National Intellectual Property Administration. There are also currently more than 10,000 'meta-bars' where customers may play games while also immersing themselves and their friends in a virtual reality world, like in the graphic below. Similar to the early days of web 2.0, we see an 'internet coffee culture' resurrection through these meta-bars. 

The strong regulatory push underway

The Chinese government has already began developing a system of regulations to prevent abuses. In addition, it seeks to develop its own metaverse, a.k.a. the 'Chinaverse', with its own set of guidelines, developing its own virtual reality in order to control the metaverse.

Chinese officials have advocated for "creating norms," "clarifying limits," and establishing "red lines and no-go zones" in response to the growing interest of Chinese businesses in the metaverse opportunity. For brands who wish to be part of the tremendous potential, they explicitly would like to build a regulatory framework.

This is particularly the case of ByteDance, parent company of the social network TikTok, Tencent and Alibaba. For these companies, the metaverse and related technologies, namely virtual or augmented reality, are new means of attracting younger internet users.

A blockchain platform common to all Chinese companies?

To help make typically lengthy and expensive operations, such cross-border money transfers, more transparent and efficient, a blockchain-based service network (BSN) is being built which may allow tasks to be carried out quickly and automatically. Chinese authorities believe that this technology is especially crucial in sectors like finance, banking, and international trade. The BSN platform is specifically targeted at businesses that already manages cloud computing infrastructure. For businesses that own or maintain their own private cloud or intranet, for instance, such protocol are especially crucial.

Think about the BSN as a one-stop shop for deploying applications in the cloud. China hopes to address a significant issue, namely metaverse interoperability (or making different blockchains work with each other). In doing so, China is currently finding a solution to a procedure that might be expensive and time-consuming for businesses thanks to the advanced technology it requires. For instance, two banks may be unable to cooperate if their applications were created using separate technologies, blockchain or platforms. But with the BSN infrastructure precisely it will be possible to establish a bridge between the different blockchains.

BSN will likely be totally centralised in order to maintain the approval of Chinese authorities, unlike the majority of decentralised blockchains used in the Western market. In doing so, China will maintain some control over a platform that will undoubtedly be crucial in the years to come. The underlying mismatch between China's desire to foster a national blockchain development environment and the decentralised nature of blockchain technology, as Garrick Hilleman has noted, is a paradox and a key difference.

So back to the Chinaverse, how is it being developed?

1. Pilot areas

The recently issued 14th Five-Year Plan encourages the use of the metaverse in industries like gaming, security, industrial manufacturing, utilities, and corporate offices. The Chinese Ministry of Science has already approved a total of 18 innovation pilot zones that will eventually serve as the nation's infrastructure and ecosystem for the metaverse and future computing power in the field of artificial and virtual intelligence. There are no set dates for when the research and development must be completed.

Yet over the last two months, local government has increased the number of incentives to support R&D in this field. For instance, in Zhejiang, the "priority for technical growth" is the metaverse, while in Hefei province officials list the metaverse, superconductors, and precision medicine all at the top of their agenda for development.

2. “Huge” investments

Morgan Stanley estimated the potential of the Chinese market alone at $8 trillion in a research report, and Goldman Sachs rapidly added this figure for all worldwide metaverses. According to independent business publication Caixin, dozens of Chinese companies vow they will create "the digital space of the future" in a cycle of "frenzied" investments.

Think of XiRang (Baidu’s metaverse) as a SaaS (software as a service) provider, but for the metaverse. The Chinese search engine and AI systems provider has already filed a trademark application for the term “metaapp”. Baidu's applications were filed Oct. 29, a day after Mark Zuckerberg announced the company's name change to Meta, to better reflect the global social media giant's future direction. It is similar to 'Baidu Brain', the company's open AI platform, offering lots of basic AI features and hundreds of thousands of models for developers. XiRang, will similarly, aim to be the catalyst for metaverse builders.

3. Digital regulations

Companies in China typically have less regulatory leeway than those in the US. The user experience is anticipated to be impacted by China's restrictions because, typically, it means less freedom for innovation. In other words, not all avatars will have the same abilities to see, say, and do.

For instance, before games can be published in China, they must pass a more stringent approval process from the authorities. Because Beijing's content laws ban gore and violent imagery, certain popular games that are available to play in China include green blood instead of red. From this vantage point, the intellectual discussion is fed; these basic rules are now in place and will probably be extended to the Chinese metaverse.

Since Chinese regulators are already cautious of the digital payment systems used in platforms similar to the metaverse that are accessible in the US, such as Roblox, Sandbox, or Decentraland, we can't see why they would change their stance on internet regulation just because it's the metaverse, at least not just yet.

Metaverse: economic differences China West
Currency Digital yuan Cryptocurrencies
Assets circulation BSN Alliance chain Public blockchain & NFTs

In conclusion, what we see in China is just like what happened with web 2.0; China seems to be developing a whole new offer for the metaverse. To be clearer, China appears not to be bothering with the initial crypto and NFT stages of web 3.0, but is directly diving into the era of metaverse 1.0, with virtual worlds completely virtual or hologramic, with its own currency and legislation. 

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