China metaverse: long shadow throws out growth

The letter c is clean, censored, compliant and cripto-less, according to experts.

The description points to the long shadow thrown by Chinese authorities who have already intimated that they will have a heavy regulatory hand in how it will develop, a shadow that some Chinese metaverse advocates fear will stunt its growth.

Experts say that China's metaverse efforts lag countries such as the United States and South Korea, citing less investment by domestic tech giants. China has yet to see a VR platform or metaverse because of the ban on industry-leading products like Meta s Oculus Virtual Reality VR headsets in China and the slow development of attractive domestically made VR headsets.

Interest has started to surge. According to Tianyancha, more than 1,000 companies including Alibaba Group Holding and Tencent Holdings Ltd have applied for around 10,000 metaverse-related trademarks in the past year.

In December, Baidu launched XiRang, described as China's first metaverse platform, but it has been widely criticized for not offering a high-level immersive experience. Baidu says it is a work in progress.

More investment is seen in startups. In the three months to end-November, more than 10 billion yuan were invested in metaverse-related ventures, more than the 2.1 billion yuan of investment that China s VR and related industries attracted for all of 2020, according to Sino Global, a venture capital firm focused on China.

Investors and venture capital managers who hadn't talked to me in years were suddenly asking if I want to go for a meal and talk. Pan Bohang, a Beijing-based company that plans to launch a VR gaming platform, said they all want to talk metaverse.

Experts say that the infancy of China's metaverse allows Beijing plenty of room to co-opt its development, especially since the current metaverse buzz has coincided with a regulatory crackdown on tech and other industries.

Traditional Chinese internet businesses were the first to be regulated. As they are built, the industries like the metaverse will be regulated as they are built, said Du Zhengping, head of the state-backed China Mobile Communications Association's metaverse industry committee, which was formed in October.

But China s authoritarian approach is at odds with the way in which the metaverse is developing in other parts of the world where users are attracted to new ways of expressing themselves, and it will stifle growth, says Eloi Gerard, a VR entrepreneur who worked in China for 10 years before moving to Los Angeles.

He said that the metaverse is already a place where people gather and use the virtual world to share ideas. This is something people are doing on VRChat right now, referring to a popular San Francisco-based VR platform.

One can move between virtual worlds, this idea is immediately opposed to the idea of one party, one voice, one vision. Experts note that gaming in China is tightly regulated as a gateway to the metaverse.

Games must be approved by the government and while battle games are allowed, strong violent content, such as the depiction of blood and dead bodies, is banned, as is anything that can be construed as obscene. As part of their recent regulatory crackdown, authorities have tried to control gaming by minors as well as excessive adulation of celebrities and money.

Gaming giants such as Tencent and NetEase Inc have publicly stated that they will comply with any rules while developing metaverse offerings.

The long arm of the government is looking set to be felt in other ways too. An influential app, Xuexi Qiangguo, that is required reading for many Chinese Communist Party cadres, published an article in November that said the metaverse should be used to improve the quality of mandatory ideological education classes for school children.

A registration system for metaverse communities was proposed at a January meeting of the Beijing municipal political advisory body that discussed metaverse development, aimed at preventing them from being influenced by wider public opinion and causing economic or financial shocks, according to a state media report.

They are notably absent in China's metaverse as they have been banned by Beijing, a feature of many Western metaverse worlds. The manifold forms of Chinese digital payment that are already in use, like the central government's digital yuan, will likely take their place.

Some entrepreneurs say that the metaverse of China will flourish simply because of Chinese consumers willingness to try new forms of online entertainment.

Nikk Mitchell, whose company is in talks about metaverse projects based on Chinese stories that will play up elements such as Chinese calligraphy and traditional costumes, is one such believer, noting progress in domestic VR glasses and content.

When Chinese consumers are ready to give this metaverse-related tech another shot, there will be mass adoption at a level that I don't think will happen in the West, he said.