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The Future of China’s Metaverses

In November 2021, many companies around the world began to announce the creation of their own metaverse. Chinese developers are no exception. At the end of 2021, about 1,360 organizations filed more than 8,000 trademark applications with the words Metaverse and Yuanyuzhou — the Chinese translation of the word “metaverse”. 

These organizations include corporations such as Huawei, NetEase, Tencent, and Baidu. The latter already presented a working prototype of its Xi Rang metaverse in December 2021. We will tell you more about it in the material. And using its example, we will show how the metaverses will work in China and how the country’s authorities will regulate them.

The Xi Rang metaverse by Baidu

Baidu began building its own metaverse platform in December 2020. It was named Xi Rang, which translates from Chinese as “The Land of Hope”. The Metaverse will look like a virtual city with games, entertainment, education, advertising, conferences and exhibitions. And the open source code will help speed up its development.

Baidu CEO's speech in Xi Rang
Baidu CEO’s speech at the first virtual conference in Xi Rang

Baidu held the Baidu AI Developer Conference in Xi Rang from December 27 to 29, 2021. Only Chinese users could access it by special invitation. It was possible to connect to it from various devices: from a computer, a phone, or a VR headset from the Chinese manufacturer Pico.

Many buildings have been created on the platform, in the rooms of which business meetings can be held. All users during the conference could attend the Baidu CEO’s speech and participate in discussions. Exhibition stands and concerts featuring cartoon characters were also available.

In addition, some Chinese landmarks have been recreated on the platform, and interactive activities have been created for them. For example, the Shaolin Temple, where you can practice the art of kung fu.

The Xi Rang metaverse mimics the real world in many ways. For example, there is no fast travel. Users walk the metaverse on foot and can use public and private transport. This is an unusual solution for modern platforms, because Western projects usually have a fast travel function to quickly move to the area of the map that the user needs. For example, such a function is available in Decentraland and CryptoVoxels.

Vehicles in Xi Rang
Vehicles in Xi Rang for realistic movement through the metaverse

But the metaverse has shown a lot of technical glitches. For example, user avatars sometimes pass through walls or objects, and certain areas of the virtual world take a while to load. Also, Xi Rang can only accommodate 100,000 users when connected at the same time. Baidu’s vice president said that it will take at least six more years to finalize the metaverse and develop artificial intelligence.

For now, Baidu aims to create a purely non-commercial platform. Xi Rang will not support cryptocurrencies, various tradable items, or speculation on virtual items. And only some of the software components are based on the blockchain. The company did this in order to comply with all the requirements from the Chinese regulators.

Chinese government’s attitude towards the metaverses

The government of the People’s Republic of China is wary of the subject of metaverses. The most mistrust of the government is the use of blockchain technology. In the summer of 2021, the Chinese authorities imposed a ban on mining and OTC trading. And in the fall of 2021, the director of the People’s Bank of China informed companies about the risks in the cryptocurrency market. He recommended not to use blockchain technology due to the frequent cases of fraud.

But at the same time, the government sees the need for the development of metaverses. They were included in one of the four areas of Shanghai research for the next 5 years. The City will encourage the use of the Metaverse in areas such as public services, business offices, social entertainment, industrial manufacturing, industrial safety, and electronic gaming. 

And at the end of the year, the state organization China Mobile Communications Association announced the establishment of the Metaverse Industry Committee in China. The authorities also plan to create legislation to regulate the activities of the metaverses. 

In 2022, the Chinese authorities are going to actively fight against the monopoly and fraud in the virtual world. Metaverse developers are already prohibited from issuing their own cryptocurrencies and monetizing their projects. But the sale of NFTs for the Chinese yuan is allowed.

The future of the metaverses in China

China has full control over the Internet in the country and chooses who to issue permission to open servers. Therefore, the main foreign social networks are blocked there. Because of this, foreign metaverses will not enter the Chinese market soon, and in the coming years, only local developers of metaverses will create competition.

Dan Ives, Senior Equity Research Analyst at Wedbush Securities, believes that Western developers will start monetizing their virtual worlds as early as 2024. And the Xi Rang metaverse at this moment will still be in development. Therefore, the 6 years that Baidu will need is too long for the global market.

Baidu in China can compete with Alibaba Group, the corporation that owns the AliExpress marketplace. On December 6, 2021, the corporation registered the Yuanjing Shengsheng company, which will create metaverses.

And Tencent has filed over 100 trademark applications for its gaming metaverses. Back in November 2021, the corporation announced support from Beijing on the condition that the corporation would comply with Chinese law. Now Tencent is one of the giants of the gaming industry and owns 100% of the shares of Riot Games and 40% of the shares of Epic Games, the creators of Fortnite. The corporation is also working on the Chinese version of the Roblox metaverse together with the developers of the original, Western version. It will be called LuoBuLeSi.

Also, Chinese analysts believe that many of the companies that have applied for the registration of the metaverse did so only to raise interest in their products. In their opinion, these projects will disappear from the market as soon as the public switches to another trend. Or they will change their field of activity, because not all announced platforms fit the concept of metaverses.

Conclusion

The Chinese company Baidu presented a working prototype of its Xi Rang metaverse and held the first virtual conference in it. Now the platform only accommodates 100,000 users and has many technical failures. And it will take another 6 years to finalize it. Xi Rang will be a non-commercial project with no crypto assets.

The Chinese authorities are ready to support the metaverses only if they comply with legal restrictions. Mining, OTC trading and the issuance of crypto assets are currently prohibited in the country. But trading NFTs for yuan and creating metaverses is allowed.

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Editor:
Dmitry Yegorov

Cover and illustrations:
Julia Chistyakova

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