Episode 1 – Chinaverse: Who Will Be Middle Empire’s “Ready Player One”?

Apple, Microsoft, Meta, Nvidia, Google… So many companies across the Atlantic that come to mind when we talk about this “world of tomorrow”. You know, this world where the line between the virtual and the physical is blurring. If in Uncle Sam’s land the race is now taking place between the tech giants, without really knowing which way to go to conquer the metaverse, on the side of the Middle Empire, the government and the tech companies are also getting in on it. the universe.

Metaverse? What?

Defining it in 2022 is no simple task, as it is constantly shaped by the ambitions of the people who use it. Simply put, the term “metaverse” is a contraction of the words “meta” (referring to a mirror) and “to” for “universe”. The word refers to digital spaces far more advanced than virtual reality (VR) or augmented reality. It is about extending our reality into shared virtual spaces, which are modeled in a 3D environment. In a way, the metaverse encompasses any digital online experience that is continuous, immersive, three-dimensional, and virtual. The word is translated into Chinese as “yuan yuzhou”.

Metaverse is not new to the entertainment industry. There are many TV series and many movies that can refer to the metaverse: “2001: A Space Odyssey” (1968), “Tron” (1982), “The Matrix” (1999), “Black Mirror” (2011), ” Gati Player One” (2018), to name a few. In fact, the video game sector also plays a large role in the history of the metaverse, with Second Life (2003), Roblox (2006), Fortnite (2017) and Axie Infinity (2018) being the most prominent titles.

For those who have never heard of either of these titles, let me reveal a preview of Steven Spielberg’s Willing Player, which is perhaps the most evocative achievement when it comes to the metaverse. At least, that’s generally the image the general public has of him at present.

Has Metaverse Fever Reached the Great Wall?

In China, discussions about metaverses began within the investment, technology and gaming communities around the time Roblox went public in March 2021. Five months later, online searches for meTraders erupted when ByteDance, TikTok’s parent company, bought Chinese virtual reality headset maker Pico. Facebook’s parent company’s rebranding to Meta in October 2021 added the final layer that made the term a household name around the world. Metaverse power accelerated in China thereafter.

In February 2022, more than 1,500 companies filed 16,000 trademark applications containing the word “metaverse”, double the total of 8,534 registered two months earlier. In the first quarter of 2022 alone, 15 metaverse-related enterprises worth at least four billion yuan were established. Tencent has applied for about 100 yuan yuzhou-related trademarks, including QQ Metaverse, QQ Music Metaverse and Kings Metaverse. Other technology players, mostly in entertainment, quickly followed suit.

In contrast, in response to the high number of trademark filings, China’s National Intellectual Property Administration (CNIPA) said it would only approve projects that contribute to the development of core technologies surrounding the metaverse. The authority rejected multiple requests it said were only intended to create hype about the concept, including filings by Tencent, e-commerce pioneer Alibaba and video game giant NetEase.

Match: Central Government VS Local Government

The yuzhou yuan investment frenzy has prompted Chinese state media to warn against speculative trading in the new unregulated cyber frontier. This is the first sign of Beijing’s attention to metaverse developments. At the moment, the central government remains on hold and does not take any clear measures to oppose or support the expansion of the sector.

The only recent initiative that could make a connection with the “yuzhou yuan” would be the announcement of the opening of its platform dedicated to non-tradable tokens (NFT) called “China Digital Asset Exchange”, which will be run from China Technology Exchange. and art exhibitions in China, both supported by the government. But it’s too early to confirm anything about a potential Chinese national government-backed metaverse/internet 3.0.

Basically, Beijing does not have a total aversion to the metaverse. After all, this is not only an $8 trillion digital opportunity, but also an arena where the country can position itself as a global leader. The embryonic nature of the Chinese metaverse leaves Beijing free to control its development, trying to strike a balance between regulatory control and the risk of stifling technological innovation.

It is true that the highly immersive and decentralized nature of 3D virtual space can create new ideologies, posing risks to national, financial and social security. Thus, the term does not appear in any document issued by the Chinese central government at the time of this writing.

But for their part, local governments are embracing the new phase of the Internet with ambitious action plans. Despite Beijing’s ambiguous stance, local officials are pumping money into metaverse stocks to boost the region’s economic competitiveness.

As of November 2022, 20 local governments have included the metaverse in their development plans. Tongzhou District, in Beijing, has created a fund to finance metaverse startups and encourage research in this field. Shanghai will develop software, attract talent and strengthen research and development. It is interesting to note that the Middle Country naturally supports innovation, but above all it allows local officials to be flexible when the central government changes its position in this area.

How could China’s Universe be shaped?

Beijing has a long history of filtering politically sensitive internet content. The new digital realm will be no different; Strict government control, content censorship and blocking of foreign providers are expected. The country will arguably build the metaverse on its own terms to serve the state’s economic priorities and ideological goals, separating it from the rest of the world. The experience will be very different, comparable to how the Internet appears behind the Great Firewall.

Monitoring illicit financial activities and curbing speculative trading around the metaverse are high on China’s agenda. The site actively monitors markets for tokens backed by various blockchains. After banning cryptocurrency mining and transactions in 2021, Beijing announced plans in May 2022 to further ban the resale of NFTs and limit the donation of what it calls “digital collectibles.”

Based on past shocks, other similar virtual assets are likely to be problematic. In fact, China has launched a state-backed digital currency known as the “digital yuan” or e-CNY, which could be an alternative to payments in the metaverse. By the way, China is by far the most advanced country when it comes to central bank digital currency with over 260 million users last year. NFTs enjoy a special status in China compared to the rest of the world, as they carry the special designation of “digital collectibles” rather than NFTs. Moreover, it is possible to deal only with reliable money, cryptocurrencies, as mentioned above, are prohibited.

Surprisingly, the Chinese authorities are well on their way to forming the regulatory framework for their Chinaverse. Under the supervision of the Ministry of Industry and Information Technology (MIIT), two industry groups – the Metaverse Industry Committee and the Metaverse Industry Professional Committee – have been formed to promote a healthy, orderly and sustainable development of the virtual space industry . Beyond regulations, China’s national metaverse may feature a quite different user interface and experience compared to other markets.

The rise of live streaming and voice-based social media in China reflects consumer demand for real human interactions. Rather than focusing on the visual aspect, as is the case with many American metaverse platforms, the Chinese yuanyuzhou will probably be richer in audio content. It may also be more industry-oriented, as Chinese authorities are studying its potential for the digital economy and multi-sectoral industrial transformation, such as health and education in particular.

There is no doubt that Chinese Internet companies are keen to explore the possibilities of the metaverse. The increasingly saturated smartphone and mobile internet markets are pushing them to find new ways to appeal to the new generation of internet users. The future of social media may be a solution to stagnant growth. However, Beijing’s determination to curb the power of its tech titans could make their metaverse journey more difficult. Since the end of 2020, new rules have been adopted in areas ranging from antitrust and personal data to privacy protection. The time to protect children’s online play has come into force. In January 2022, the authorities approved new standards for recommendation algorithms, followed by draft rules for so-called deep algorithms.

Synthesis technologies, which will likely be used to limit metaverse applications as well. This means Chinese tech companies need to tread carefully as regulations could tighten on key building blocks of digital worlds, namely gaming, VR/AR technology and payments.

Conclusion

Needless to say, the brand craze has hinted at some of the earliest apps in the Chinaverse. As in the US market, efforts are focused on VR, gaming and interactive social environments. In addition, features already advanced in China, such as payment and integrated online services similar to WeChat, are likely to be expanded and integrated into Chinaverse.

Companies with sufficient financial prowess, a strong focus on scientific research and a long-term strategic vision will be in a better position in the race for the metaverse. According to industry analysts, Tencent, US-blocked Huawei, Alibaba, Google-like Baidu, NetEase and ByteDance are the country’s leaders in this field. These big Chinese tech names have their own take on the new virtual world. Although their development axes are quite different depending on their expertise, they are all going in the same direction: equipping their VR/AR hardware and software with a strong content ecosystem. In the coming episodes we will explore the technological advancements, use cases and metaverse ambitions of the aforementioned Chinese companies.

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