The Chinese metaverse will likely be based on its own standards – but with a local market of 1 billion users, China can still make it work.
With the strategic rivalry between the West and China rapidly evolving into an ideological struggle, new technologies that emerge are likely to be governed by two standards: one for China and its partners and another for everyone else. The current excitement around the metaverse is a great example of this as numerous Chinese state-backed entities are investing hard into local companies in an effort to ensure that the Chinese version emerges first.
The newly established Metaverse Industry Committee founded by state-owned China Mobile that now has 17 companies as members aims to ensure the “healthy, orderly and sustainable development of the metaverse”. In English, this means that the state will oversee the developments in the metaverse and will put a stop to anything that it does not like.
A good example of this is cryptocurrency. The Chinese state hates cryptocurrency as it threatens to undermine its ability to print money and control its currency and consequently transactions in cryptocurrencies both at home and abroad have been banned. However, cryptocurrency is supposed to be a large part of the Metaverse, meaning that the Chinese version of the Metaverse will be running on the digital Yuan which is currently being tested.
RFM Research has found no reason why cryptocurrency has to be used rather than traditional payment rails in the Metaverse, and that it is just that the general view seems to be that this is the case. In fact, RFM finds that the overhead cost of the distributed ledger system is so onerous that at the moment, blockchain supported payment systems are completely unsuited for transactions.
However, the same system on a single ledger (managed by the PBOC) would not have these issues and would make the digital yuan a good candidate for running the economy of the Chinese Metaverse.
The net result is that from Tencent to the Chinese state to the smallest start-ups, a lot of money is being poured into developing the Metaverse for China.
Given how the technological rivalry has evolved into an ideological rivalry, RFM and Alavan Independent do not expect that the Chinese Metaverse will be open to all. In fact, it is likely to be limited to being a Chinese Metaverse for Chinese users based in China and not much else.
This greatly limits the long-term upside for companies developing the Chinese Metaverse, because they will be cut off from addressing markets overseas, but crucially it is a viable proposition even in this vestigial state. This is because there are over 1 billion potential users in China, meaning that even being just in China, it will be an economically viable proposition.
This is the first example of “build the wall” that RFM Research and Alavan Independent predicted would emerge in the absence of any rapprochement between the two sides. We suspect that there will be many others.