The Shanghai city government released a policy paper on July 8th, 2022, outlining its strategy to build its Metaverse industry to 350 billion yuan, or $52 billion, by the end of 2025. The strategy focuses on developing the technical infrastructure needed for the Metaverse, including VR headsets, chips, 5G, and cloud computing, while also fostering the creation of new companies in the space. Like Dubai and other entities in the public sector, the Shanghai city government wants the jobs and economic value expected to come from the growth of the Metaverse.
Investing in the 3D Internet
Many of China’s major companies are already investing in the 3D internet. In 2019, Tencent announced a joint venture with Roblox, covering a portfolio of projects ranging from social media to cloud computing to gaming. Alibaba has made investments in AR and VR technologies since 2016. ByteDance, the company behind TikTok, acquired the VR headset manufacturer Pico in 2021. Baidu released XiRang, their toolset and SaaS-style enabler for third-party Metaverse creators.
Collectively, six of China’s tech giants, including the ones mentioned above, were placed in the top ten firms worldwide that filed the most XR patent applications in the past two years.
A Cautious Approach to Decentralization
However, one key element less prevalent in Shanghai’s strategy, as opposed to other cities, was blockchain-based technologies, including cryptocurrencies and NFTs. Despite Asian cities showing more interest in NFTs and digital assets than their Western counterparts — not to mention China’s domination of the proof-of-work crypto mining industry — the Chinese government has made it clear that they’re taking a more cautious approach.
Companies, which are kept under a close eye by the government, follow in the same footsteps: Baidu’s XiRang app won’t support cryptocurrencies or trading assets representing virtual property.
A CNBC article reports that in late 2021, “the Chinese government’s central disciplinary commission published an article on its website about the global history of the Metaverse. The piece also warned about the risk of unsubstantiated Metaverse hype by some companies, and the need for financial supervision in the virtual world.”
Meanwhile, the government has been busy promoting its own central bank-issued digital currency called the digital yuan or e-CNY.
In many ways, this makes total sense. Blockchain is all about decentralization, or removing power from central entities and giving autonomy to individuals. Alongside that comes the qualities of anonymity, censorship-resistance, and tamper-resistance — qualities that don’t typically come to mind for the Chinese government.
Surveillence and Regulations
Although the Chinese government clearly wants to reap the economic and political benefits of dominating the Metaverse, it isn’t surrendering its longstanding traditions of surveillance, control, and protection against Western liberal thinking that marks many of the projects in the Metaverse and so-called Web3.
This is just an extension of its approach to the current Internet, where online channels are monitored, media is controlled, and Western social media platforms are banned. Internet companies in China are tightly regulated by the government, and the same will be the case for companies developing the Metaverse.
For the Chinese government, the Metaverse is an opportunity to continue surveilling the country’s population and deliver curated news, but even more carefully. This is what The Economist calls the ‘Metaverse with Chinese characteristics.’ Not that surveillance and influenced media don’t exist in Western countries, it’s just more prevalent in China.
AR/VR technology collects much more personal information than current interfaces to the 2D internet — information that can reveal your emotions and your state of mind, giving insights into your thoughts. A government-issued digital currency, even if it’s based on blockchain, makes collecting taxes and monitoring capital flows much easier for the government.
Final Thoughts on the Shanghai Metaverse Strategy
In this light, it makes perfect sense that China wants to develop its own closed, controlled Metaverse and not rely on the technological or commercial pillars of the West. The current divide between the Internet, West, and East will only expand.
Much of the discussion about walled gardens and fractionalizing the Metaverse has been about companies having their own virtual worlds. However, in reality, it might be that Metaverses are divided by the country or region in which they’re from.