Even as a new crypto winter blows in, tech investors and entrepreneurs are banking on the inevitable shift to Web3, an era marked by decentralization, blockchain, digital currency and the metaverse.
China appears set to play a critical role in the internet’s coming metamorphosis. Earlier this year, Morgan Stanley predicted that the country’s metaverse market will eventually be worth $8 trillion. Sensing the changing tides, top Chinese tech giants – such as Tencent, Alibaba, Baidu and ByteDance – have been investing in the emerging field for several years.
Recent actions by domestic regulators, including a crypto crackdown and new restrictions on NFTs, might seem to cast a shadow over the country’s metaverse development prospects. However, China’s sprawling tech industry and sheer size of its consumer base means that it will likely be capable realizing an alternative paradigm – the Chinaverse.
Simin Lin, Head of Research in Consulting at the Shanghai branch of French firm Fabernovel, says that current shifts underway in the internet sector resemble previous transformations, such as the rise of platforms based on user-generated content rather than read-only formats in the mid-2000s.
“Giant companies have fallen due to that transition,” she told Pandaily, adding, “From Web2 to Web3, there will also be a revolution, but it hasn’t happened yet.”
In a recently released report entitled “Into the Chinaverse,” Fabernovel argues that the so-called “Meta wave” has already reached China, earning both the support of the central government and enthusiasm from the domestic tech sector.
In late 2021, Beijing-based Baidu released “Xirang,” meaning “land of hope,” which is one of the country’s most of advanced iterations of the metaverse to date. Based on its core strengths in AI, cloud computing and chips, the firm hopes to serve as a pioneer in the field.
ByteDance, the owner of global social media juggernaut TikTok, acquired leading VR hardware firm Pico last year. Combined with ByteDance’s massive user base and impressive content generation capabilities, the partnership could prove to be highly consequential.
Meanwhile, Tencent has been testing a Music Zone for its QQ Music platform in July. This interactive and immersive virtual space offers users the chance to socialize through building individual “homes” within the community.
The Shenzhen-based tech giant, which is also the developer of WeChat, previously sought to capitalize on the worldwide NFT craze with the launch of Huanhe (幻核), a digital collection trading platform. However, news emerged earlier this month that Tencent will be shutting down the platform in the near future, as NFT sales slump and domestic regulators issue further restrictions.
Whereas non-fungible tokens are often viewed around the world as a core building block of the metaverse and Web3, Chinese authorities have shown increasing skepticism. The term “digital collectibles” (数字藏品) – virtual properties without the financial backing of cryptocurrencies – has been adopted to describe the less risky and speculative alternatives that have seen surging popularity in China this year.
The country’s major tech firms are following suit. Earlier in July, the China Cultural Industry Association and a coalition of top industry players jointly proposed the development and standardization of digital collectibles, ensuring that the layout of this burgeoning sector will align with regulatory wishes to avoid crypto pitfalls.
Beyond the Giants: Startups and Regulators Will Shape the Chinaverse
“All these big companies are preparing the major technologies to enter into the metaverse and to prepare for Web3,” said Simin Lin. “But even still, I think we shouldn’t ignore the startups.”
Beyond China’s tech giants, a new generation of Web3-native companies is emerging across various sectors, including social media, gaming, and extended reality. Augmented glasses startup Nreal, for example, has been making strides both within China and globally, having launched operations in the United Kingdom in May.
Hong Kong-based Animoca Brands, a frequent investor in metaverse and crypto startups that is rapidly emerging as a leader in the field of Web3 gaming, has recently secured an additional $75 million in funding, giving it an overall valuation of $5.9 billion.
Virtual reality hardware firm STEPVR, meanwhile, recently launched a completely immersive product dubbed the “gate to the metaverse,” allowing users to step into a large physical box to consume and participate in digital content.
With all of this activity brewing in the private sector, Chinese authorities are also considering the opportunities presented by a Web3 future.
On July 12, the Shanghai Municipal Government released a draft “14th Five-Year Plan for the Development of Shanghai’s Digital Economy,” which expounds upon the innovative capabilities of blockchain technology as a governance method. The document claims the city must “create influential metaverse benchmark demonstration applications,” covering diverse fields such as entertainment, online education, medical care, and others.
Simin Lin of Fabernovel claims that such statements should be understood as “public-to-public policy.” Rather than dictate specific details of an emerging and still largely unknown industry, Lin says the strategy is to offer support for local policymakers, saying: “Okay, now we are encouraging this kind of thing, but implementation and finding the right approach is for you to study.”