In the global Web3 development landscape, the People’s Republic of China (PRC) occupies an important space. While the country actively pursues innovations in Web3, it also adopts a unique regulatory model due to government concerns about potential instability stemming from cryptocurrencies. This mentality was on evident display in 2022. This article summarizes the key moments in China’s Web3 development this year:
December 2021-January 2022: Baidu launched China’s first domestic metaverse—Xirang
Accessible as an application on computers, smartphones, and wearable devices, the virtual world, also known as Land of Hope, invites Baidu users to login and create an avatar to explore the environment and engage with other users. The metaverse can support up to 100,000 users interacting in real time. Featuring a fusion of historical Chinese and futuristic design elements, the Möbius band-shaped space includes the sci-fi-themed Three Body Museum, an ancient Shaolin Temple, and the Creator City region, which has already played host to Baidu’s Create 2021 symposium. In line with the Chinese government’s ban on cryptocurrencies, though, XiRang does not support digital assets or digital transactions.
Early July: Self-disciplined development proposal by Chinese digital collectibles organizations
In early July, about 30 digital collectibles-related organizations, (including Tencent, Alibaba, Baidu, and JD.com), jointly issued a self-disciplined development proposal for the sector under the guidance of the state-affiliated China Cultural Industry Association.
The proposal states that digital collectibles platforms should have “relevant and appropriate credentials” to operate, referring to certificates for areas such as blockchain operations and online publications that are difficult to acquire; platforms should ban financial speculations, refrain from providing trading services, and only adopt the RMB as the transaction currency. Although the proposal is not binding, it could serve as the structure for future regulations that, if adopted, would mean only platforms powerful and resourceful enough to acquire the licenses can continue to operate.
July: Shanghai and Guangzhou unveil ambitious metaverse initiatives
In early July, Shanghai released its metaverse development initiative from 2022 to 2025, which aims to achieve $52.19 billion (350 billion RMB) for metaverse-related industries in 2025. It will focus on developing metaverse-related technologies and infrastructure. On July 15, Shanghai released its digital economy development plan during the 14th Five Year Plan era and explicitly mentioned “supporting leading companies to explore establishing an NFT trading market.” Shanghai’s high-tech industry park has since founded a metaverse innovation association, and the city hosted the 2022 World Artificial Intelligence Conference in September, at which the metaverse played a central role.
Meanwhile, Guangzhou announced in late July that its Nansha district has established a metaverse industry zone and enacted nine measures to boost local metaverse development in terms of human capital, R&D, and technology advancement. They include financial support as high as $29.6 million (200 million RMB) for metaverse platforms with “key technological innovation effects.” Guangzhou also hosted the first Bay Area Metaverse Digital Art Festival that featured three stages: digital art and design contest, digital art exhibition, and digital art urban carnival.
Early August: Tencent shuts down its “Huanhe” digital collectibles platform
Trading on “Huanhe” has significantly dwindled since its early days. In June, the platform unveiled digital collections featuring the calligraphic works of Master Hongyi to cold reception — 20,245 of the NFTs were left unsold. The slow sales saw Huanhe eventually locking and closing transactions on the collections, marking them as “ended” as opposed to “sold out.” This lackluster performance has been attributed to the price of these particular collectibles (more than 100 RMB), as much as Tencent’s regulations that restrict secondary transactions.
As Zhang Yi, a senior analyst at iiMedia Research, said to China Finance, Tencent’s shuttered businesses fall into two categories: unprofitable ventures and those with legal risks. A digital collectibles platform like Huanhe, with its ebbing sales and uncertain regulatory future, paired with the global crypto bear market, represented an unattractive prospect for the company.
September-October: China emphasizes the physical aspect in metaverse development
The concept is: “Use the virtual to enhance the real, use the virtual to strengthen the real” (以虚促实，以虚强实). It was first raised by a Chinese expert in March and was mentioned by multiple other experts throughout the year. However, in September, the same wording appeared in the title of a Xinhua op-ed, which calls for removing the “fake bubbles” and achieving “real development progress” through the metaverse.
At its core, the concept means that China prioritizes the application of metaverse technologies in a broad range of industries to enhance its national power. The op-eds named aerospace, biomedicine, autonomous vehicles, nuclear power plants, and forestry protection as promising areas. This does not mean that China’s metaverse completely discards entertainment or that the Western metaverse has no industrial application. Rather, it shows that China clearly views entertainment as of secondary importance in its state-led Web3 approach.
November: Hong Kong greenlights digital assets trading
On October 31, the government of the Hong Kong Special Administrative Region stated that it is cooperating with financial regulators to work toward the “sustainable and responsible development of the virtual assets (VA) sector in Hong Kong.” Notably, Hong Kong’s Securities and Futures Commission (SFC) will conduct public consultations on “how retail investors may be given a suitable degree of access to VAs.”
On the same day, the SFC issued a circular that states it is “actively looking into a regime that would enable the authorisation of investment products providing exposure to VAs and would meet investor demands with appropriate safeguards from an investor protection perspective.”
November: China releases national plan for VR equipment development
On November 1, China’s Ministry of Industry and Information Technology issued its 2022-2026 plan for the integrated development of virtual reality (VR) and its industrial applications, the first national development plan for China’s VR sector. The plan lists three areas to have major breakthroughs by 2026: technological innovation, supply chain updates, and the wider adaptation of VR in social and industrial activities.
According to the initiative, the total scale of China’s VR industry, including related hardware, software, and applications, will exceed $48.6 billion (350 billion RMB) by 2026. It also envisions the sale of VR terminals to exceed 250 million units and pledges support to 10 leading VR industrial clusters with regional influence and 10 industrial public service platforms to foster the sector’s development.
November: Chinese film industry pledges a bigger role for the metaverse
From November 11-14, attendees from China’s film, tech, and cultural sectors met at the 35th China Golden Rooster Award & Hundred Flowers Film Festival, where a topic of discussion was how metaverse technologies can play a bigger role in Chinese filmmaking. At the forum, MiGu, the digital content company of China’s state-owned telecommunication giant China Mobile, unveiled its metaverse filmmaking solution, which it bills the “MiGu XR Metaverse Movie Factory.” The solution boasts eight core capabilities that assist the entire filmmaking process, from shooting to marketing, among them virtual studios, digital humans, 3D effects, and immersive viewing experiences.
The forum also emphasized the importance of artistic creativity. To that end, MiGu announced that its solution will include designing strategies to promote brands and cultural IPs. MiGu’s pledge to support China’s movie sector with metaverse technologies is significant because it was involved in making several “mainstream” patriotic Chinese films in recent years.