When China Meets the Metaverse: Opportunities and Risks

May 30, 2022

 

The Metaverse is best conceptualized as “an expansive network of persistent, real-time rendered 3D worlds and simulations,” according to venture capitalist Matthew Ball.¹ The Metaverse serves both as augmentation and amplification of existing Internet and communicative platform technology, delivered through a multi-dimensional simulated environment in which individuals can interact in real-time, across an expansive setting of non-exhaustive stimuli and data points. In short, it is a parallel, yet attached, universe constructed through cutting-edge technology.

 

The operative question is what are we to make of the implications of the Metaverse for China? What are the upsides and downsides to China’s drawing upon this nascent technology? And what are the downsides of the Metaverse objects of regulatory concern that China ought to take seriously? This article submits that the Metaverse offers the Chinese economy and people vast opportunities and that the possible risks, which are certainly extant and pose valid concerns, are largely mitigable through targeted prudential measures by both government and social actors.

 

The Metaverse provides a lucrative source of economic growth and financial empowerment. As of March 2022, over 16,000 Metaverse-related trademark applications had been filed, with substantial investment made by leading tech firms into key infrastructure and platforms required for a stable and cogent Chinese Metaverse (or a multitude of them) to exist. Estimates suggest that the net size of China’s Metaverse-centric and adjacent industries is due to exceed US$50 billion by mid-2020s,² with much for firms to offer high-end and middle-class consumers alike, seeking both an alternative mode of consumption and platform for social interaction. 

 

Joint ventures with overseas technology conglomerates, such as the Tencent-Roblox (LuoBuLesi – currently being revamped)³ and BV-Supermedia Holdings (Yuanbang Technology),⁴ have driven parts of Metaverse growth - specifically, Metaverse streams that seek to leverage extant innovation and patented technologies from overseas. Homegrown talents and infra-country research and development are the primary engine of growth propelling the expansion and deepening of information and digital technologies within China. As such, and independent of structural concerns over semiconductor/chip technology, China remains largely a self-sufficient powerhouse capable of taking on more radical and substantive developments in the Metaverse. 

 

A further Metaverse opportunity, uniquely afforded to the Chinese populace, is its ability to augment and enhance experiences of “reality.” The Metaverse does not displace the real world. At least, existing trends in communicative-technological developments do not point, in any meaningful sense or form, towards that kind of substitutive relationship. Instead, the vibrant and fledgling space serves to supplement “physical reality” through providing a parallel and alternate source of entertainment.

 

Through vivid simulations of experiences and transmission of sensory stimuli at a level that the Internet alone most certainly cannot accomplish, the Metaverse could serve as a vital repository of leisure, entertainment, and sports. Users, who may lack the real-life opportunities to access such goods, would benefit from the hybridized and highly diversified range of experiences afforded by technology that can accurately store, transmit, and mimic real-life experiences. 

 

The Metaverse could well be the perfect antidote to the “lying flat culture” – a systemic push towards inertia induced by hyper-pressurized and intensive working environments. Through the eclectic and action-oriented nature of the entertainment and physical training routines on offer through the Metaverse platform, citizens could be activated to become more athletically involved, thereby improving net public health. One may find this suggestion far-fetched, but the introduction of gadgets such as Wii (in the late 2000s) and Virtual Reality Fitness Experiences (in the early 2020s, in response to the lockdowns and drastic changes induced by the pandemic⁵) have proven to be instrumental in promoting a more proactive and exercise-oriented lifestyle amongst millennials and Gen-Z individuals. 

 

Above all, the vast communicative and broadcast potential of the Metaverse cannot be underestimated. Whether it be through highly accurate and compact simulation of communities and physical spaces through entities such as the crypto-undergirded Sandbox Game⁶and/or Digital Villages,⁷ or the shortcutting of communications through effective transmogrification of mailing lists into “contact databases” of Metaverse avatars, one fact is certain: the nascent combination of optical, stimulatory, and messaging technologies folded into the constructed “universe,” is likely to expedite and improve accuracy in communications. 

 

In the context of China, this could be highly significant, as the government seeks to enhance the efficiency and targetedness of public-oriented messaging in a way that could allow for effective education and more proximate and grounded state-citizen interactions. Through sensitive and pragmatic regulation, these communicative platforms could in turn supersede both conventional social media and traditional media, in offering core stakeholders in China a better and more flexible platform for formal and informal communication. 

 

The Metaverse does not come without its fair share of challenges. At the recently concluded Two Sessions, several National People’s Congress (NPC) deputies noted the need for caution and prudence when it comes to the pursuit of Metaverse technologies by firms and innovators.⁸ NPC Deputy Gao Yu from Guizhou province called for the strengthening of regulations over economic and commercial activities on the Metaverse to ensure that risks arising from speculative activities could be internalized and tracked through inter-departmental coordination. Pony Ma (Tencent) noted that digitalization and carbon neutralization ought to go hand-in-hand and that further research is very much needed with respect to the modus operandi of Internet governance in the “new era” of the Metaverse. As such, what are the real and possible risks brought about by the Metaverse? 

 

 

The first pitfall concerns the regulatory lacunae of the Metaverse. In a recent analysis concerning the legal implications of the Metaverse, Clifford Chance, an international law firm headquartered in the UK noted that, as the world comes to grapple with the fullest implications of the Metaverse, concerns over data security and protection, intellectual property, and the distribution and development of financial-technological products in the space are likely to take center stage over the next decade.⁹ How should the state regulate the Metaverse? Should the arbitration responsibilities be assigned to district and municipal courts, or should there be a separate legal institution empowered by the National People’s Congress with the specifically designated functions of monitoring and governing the “Chinese Metaverse”? What are we to make of instances where the jurisdiction of the agents involved remains less-than-clear – e.g., it is ambiguous as to whether agents involved in potentially illicit activities fall into the legal jurisdiction of China or other countries? How should effective and direct enforcement be carried out, while retaining the virtues of quasi-anonymity and confidentiality associated with the Metaverse? These are challenges that security experts in China must address.

 

The second pitfall concerns the possible emergence of oligopolies that act to stifle or restrict competition in the domain. Unbridled Big Tech is a conspicuous and pressing problem in the West, with leading tech firms regularly clashing with governmental regulatory authorities over the limits and scope of their powers. This issue is rendered less salient by the more rigorous and preemptive regulation active in China. Yet, going forward, how are we to ensure that the Metaverse will not become merely a “pay-to-play,” exclusive space that crowds out small and medium enterprises, as well as individual innovators? 

 

Given the vast barriers to entry in relation to technological and infrastructural developments in the Metaverse, the commitment to equal access and opportunities, which is noble in principle, is difficult to implement fully in practice. A healthy and organic combination of anti-trust laws and positive incentives, which prompt technology firms to move in more socially productive directions and subsidies for up-and-coming Meta-startups, would be necessary to preserve competitiveness and openness in the market at large. 

 

Finally, and on a more conceptual level – how should we approach the Metaverse’s relationship with the “universe” that we currently inhabit? Notwithstanding the discussion above, which suggests the possibility to retain both our commitments and pursuits within lived reality and a turn to the Metaverse for additional opportunities and experiences – much is easier said than done. Where do we draw the line, and how can we ascertain that the Metaverse does not fundamentally disrupt and denature the relationships that bind humanity together? How can we leverage the Metaverse for good, as opposed to self-justifying lethargy and resignation from reality? 

 

With the multitude of problems that remain unresolved in our world – ranging from climate change to the ongoing COVID-19 pandemic and socioeconomic inequality to rampant inflation, it is vital to not view the Metaverse as a defeatist escape from reality. Such a mindset is neither conducive to global prosperity nor our continued and collective survival as a species.

 

Along with its inherent abundance of opportunities, there is much good that the Chinese state and civil society could produce through the Metaverse. This includes more accurate and responsive public policymaking, an expansion in the range and quality of economic outcomes and pathways, and the empowerment of critical stakeholders in the start-up and innovative industries. Yet concurrently, we must also beware of the perils that such technology could bring. The English adage, “the same knife cuts bread and fingers” is confirmed in the Chinese maxim, “the water that bears the boat is the same that swallows it up.”

 

 

1. Matthew Ball, “Framework for the Metaverse,” MatthewBall.vc (MatthewBall.vc, March 9, 2022), https://www.matthewball.vc/all/forwardtothemetaverseprimer.

2. Takashi Kawakami, “China’s Frenzied Metaverse Poised to Balloon into $50bn Business,” Nikkei Asia (Nikkei Asia, March 15, 2022), https://asia.nikkei.com/Business/China-tech/China-s-frenzied-metaverse-poised-to-balloon-into-50bn-business#:~:text=More%20than%201%2C500%20companies%20are,(%2453%20billion)%20by%202025.

3. “开启罗布乐思之旅,” 罗布乐思官方网站-腾讯游戏, accessed May 12, 2022, https://roblox.qq.com/.

4. CoinYuppie, “Supermedia Holdings and BV Baidu Ventures Jointly Initiated the Establishment of Yuanbang Technology to Accelerate the Development of Metaverse,” CoinYuppie, April 28, 2022, https://coinyuppie.com/supermedia-holdings-and-bv-baidu-ventures-jointly-initiated-the-establishment-of-yuanbang-technology-to-accelerate-the-development-of-metaverse/.

5. Megan Wollerton, “Best Smart Home Gym Workouts of 2022: Peloton, Mirror, Tempo and More,” CNET (CNET, April 27, 2022), https://www.cnet.com/health/fitness/best-smart-home-gym-workouts/.

6. “The Sandbox Game — User-Generated Crypto & Blockchain Games,” accessed May 12, 2022, https://www.sandbox.game/en/. 

7. “About Digital Village,” About Digital Village, accessed May 12, 2022, https://info.digitalvillage.io/.

8. 赵融 , “政策密集发布 多地争抢元宇宙发展先机,” 中国财经网, April 8, 2022, http://finance.china.com.cn/qy/qyjj/20220408/5781334.shtml.

9. “The Metaverse: What Are the Legal Implications?,” Clifford Chance, February 13, 2022, https://www.cliffordchance.com/insights/resources/hubs-and-toolkits/talking-tech/en/articles/2022/02/the-metaverse--what-are-the-legal-implications-.html.