China aims to propel the real economy with a virtual economy — Metaverse
On July 19, Fang Shizhong, Director of Shanghai Bureau of culture and Tourism, revealed that the city is actively seizing metaverse opportunities and deepening systematic research in the culture and tourism industry. Shanghai is accelerating the drafting process of the city’s metaverse action plan for the next three years, says Fang.
Shanghai would not be alone in chasing the meatverse. In the past decade, mobile internet access has become a pillar industry in China. Chinese consumers have adopted mobile payment, shopping apps, ride-hailing apps, social networking platforms, and other mobile internet applications. As the mobile internet penetrates nearly every area of the Chinese people’s lives, there remains less and less room for innovation and growth. Large Chinese technology enterprises have been desperate for expansion possibilities in recent years. Many of them turned to the ineffective grocery group-buying industry, while others pondered the metaverse concept.
For tech companies, the concept of the metaverse depicts an uncertain but exciting future with multiple entry points, such as fundamental technologies including AI, VR, Digital Twins, blockchain, cloud computing, and 5G, as well as commercialized applications such as meta social platforms, gaming, virtual education methods, etc. The unpredictability of the metaverse’s future in China prompts the question: what is the government’s stance on the metaverse, and what is it doing?
The Chinese government remains cautious in general, as it is still unclear how and when the metaverse will be actualized. In the interim, the government is unwilling to pass on the enormous opportunity, which has the ability to power China’s next wave of consumer technology evolution following the mobile internet.
China’s Central Commission for Discipline Inspection and State Supervision published an article on how the metaverse will rewrite human history as early as December 2021. The post stated that the metaverse may become “the next chance for the development of gaming, social, retail, and e-commerce.” The central government later sent out a clearer signal in January this year, when the Ministry of Industry and Information Technology (MIIT) emphasized the importance of “nurturing a group of innovative small and medium-sized businesses that will foray into innovative fields such as metaverse, blockchain, and artificial intelligence.”
Local governments in China have also been adding metaverse to their reports and planning. Interestingly, almost every city or province has its own focus with regard to the metaverse. While many places such as Guangzhou, Sichuan, and Nanchang have outlined culture and tourism — the more entertaining and easily commercialized use of metaverse — as one of their metaverse access points, many cities and provinces such as Zhenjiang, Jinan, Hefei, and Shanghai have listed medical services, VR, XR as their metaverse development directions. The latter requires more investment and patience to actualize. Consequently, numerous local governments are pulling out all the stops to aid the expansion of associated businesses. Three major Chinese cities, Hangzhou, Guangzhou, and Shanghai, three major cities in China, have announced that they are establishing or have established funds for related industries. Cities including Beijing, Guangzhou, and Nanjing have implemented housing and rent subsidies. For example, Guangzhou would issue up to 1 million yuan in rental subsidies and 5 million yuan in office space subsidies for qualified enterprises.
Of all the cities and provinces (18 cities and 7 provinces to date) that have released plans associated with the metaverse, some are more intriguing than others.
Shanghai, China’s long-established financial center, is especially in need of the stimulation of fresh growth opportunities, as the city’s economy took a knock in the first half of 2022 owing to the COVID outbreak. The city’s physical businesses, such as tourism, hospitality, manufacturing, and others, are still recovering from the previous impact. On July 8, Shanghai released an action plan on the promotion of the metaverse, which targets “strengthen the real with the virtual”(以虚强实). According to the plan, the city’s “physical industries” are propelled by the expansion of “virtual industries” (those associated with the metaverse) (meaning software development and IT, which can serve as the fundamental technologies of the metaverse). Shanghai anticipates that the met averse-related industrial size will reach 350 billion yuan by 2025, driving the software and information service industries to achieve 1,500 billion yuan and the electronic manufacturing sector to exceed 550 billion yuan. Following the news, 67 associated concept stocks in Shanghai and Hong Kong hit their limits.
In Heilongjiang, a province in the northern part of China, a focus on “building a province-level public video platform and fostering industries such as immersive video programs, metaverse concerts, and performing arts” was put forward by the government in addition to building research compounds and promoting the use of the metaverse in terms of public service, city planning, telehealth, etc. The province is traditionally known for its chemical plants, machinery, agriculture, and its abundance of raw materials, which leaves the province unable to keep up with the transition to a digital economy. In recent years, Heilongjiang has been trying to grow internet-based industries such as live streaming. According to its 3-years plan published in 2020, the province aims to become a “nationally renowned live shopping capital” by providing related businesses with loans and subsidies. It seems Heilongjiang now wants to leap into the metaverse with live-streaming as an entry point, which is an angle yet unseen in other local governments’ reports.
Shandong, a province renowned as the birthplace of numerous VR enterprises such as Pico, Goldon, and Yooke, is banking on the VR aspect of the metaverse. In 2021, Shandong received national attention in the world of VR after China’s social platform and e-commerce giant ByteDance acquired Shandong-based VR company Pico for 9 billion yuan, and when the scale of the province’s capital, Qingdao’s VR industry exceeded 5 billion yuan in January 2022 according to a Qingdao Daily report. According to Shandong’s three-year strategy published in 2022, the province intends to grow the virtual reality sector with Qingdao as its hub and acquire more than 3,000 patents by 2024. The scale of Qingdao’s VR sector is projected to reach 20 billion yuan by 2024 and 100 billion yuan by 2030.
According to Bloomberg’s estimates, the global metaverse revenue opportunity could approach $800 billion in 2024. China’s ongoing endeavour to establish technological independence and self-reliance ensures that it will not miss out on the opportunity. Based on the government’s stance, the nation desires to integrate a loosely-defined metaverse with current industries and assist them in thriving (or recovering) throughout metaverse exploration. In the meantime, the country remains uninterested in the financial potential of the metaverse, such as NFTs and cryptocurrencies, as previous attempts to implement them in China have proven fraudulent.
“There is a big difference between metaverse concepts hyped by certain companies and the real metaverse, so we need to ‘remove the fake and keep the real,’ and judge carefully. From the industry’s standpoint, the metaverse will be the goal of the next-generation internet development for a long period of time and will depend on core breakthroughs, evolution, and changes in the fundamental technology and arithmetic level,” said China’s Central Commission for Discipline Inspection and State Supervision last December.