The term “metaverse” was coined in Neal Stephenson’s 1992 science fiction novel Snow Crash, where humans, as programmable avatars, interact with each other and software agents in a three-dimensional virtual space that uses the metaphor of the real world.

Today, the metaverse can be described as a digital reality that combines aspects of social media, online gaming, augmented reality (AR), virtual reality (VR), and cryptocurrencies to allow users to interact virtually. Augmented reality overlays visual elements, sounds and other sensory input onto real-world settings to enhance the user experience. Therefore, apart from cryptocurrencies, VR and AR are the two most important elements in the development of the metaverse.

Twenty years ago, Second Life started as a virtual world and quickly attracted 1 million users who created a virtual economy of $500 million. Virtual worlds are therefore not new, but the rebranding of Facebook into Meta in October 2021 put an intense focus on virtual worlds and the metaverse.

A major concert once held in Fortnite was seen by 45 million people and grossed around $20 million, including sales of merchandise. People who otherwise would not have had access to such experiences because of geography or cost can now participate.

Critics of the metaverse lament that it is just old wine in a new bottle, branding existing technologies and ideas like VR, AR and artificial intelligence under a new umbrella. But this might be what the metaverse is really about.

What is the current situation of the metaverse in China, though? Given that digital assets are normally a very important part of the metaverse but given the fact that cryptocurrencies are banned on the Chinese mainland, is there a metaverse on the mainland and, if so, what does it look like?

The metaverse wave is indeed hitting China! Baidu was the first Chinese tech company to launch a metaverse app, The Land of Hope, in December 2021. This app was the first signal that China had stepped into the global metaverse market.

Also in 2021, China established its first metaverse association, the Metaverse Industry Committee, under the State-supervised China Mobile Communications Association.

Furthermore, as per a report named Into the Chinaverse: How the Meta Wave is Hitting China, by Fabernovel, 37 million Chinese online users will have a virtual identity on metaverse platforms by 2025. Also, 500-plus metaverse companies were named after the metaverse, 93 percent of them were registered in 2021.

On the mainland, not only have companies from large corporations to small firms expressed interests in this virtual world; so have the local administrations. Local governments in the city of Shanghai, and Zhejiang, Anhui, Hubei and Sichuan provinces also incorporated the metaverse in their economic planning documents.

Shanghai was indeed the first city on the mainland to include the metaverse in December 2021 in its 14th five-year blueprint for the electronic information industry covering the 2021-25 period.

Following this, in April 2022, the Huangpu district of Guangzhou unveiled a proposal for support measures to “accelerate the innovation and development of the metaverse”, the first place in the Guangdong-Hong Kong-Macao Greater Bay Area to provide official assistance to metaverse development. The measures include a housing purchase subsidy of up to 5 million yuan ($733,000) for talents in metaverse-related aspects, and a subsidy of up to 5 million yuan for projects that boast iconic metaverse scenes with the characteristics of Huangpu.

Moreover, Morgan Stanley remarked in a research note in April that the value of this nascent virtual space could reach $8 trillion in the Chinese market alone in the future.

Technological research and consulting firm Gartner also predicted 25 percent of people would spend at least one hour a day in the metaverse for work, shopping, education, social interactions or entertainment by 2026, when 30 percent of the organizations in the world would have products and services ready for the metaverse.

Of course, the metaverse has its risks too, since, as stated by the China Banking and Insurance Regulatory Commission in a statement released in February 2022, the public need to be warned about the rise of criminal activities of illicit fundraising, fraud and others in the name of the metaverse.

This bet on the metaverse follows China’s bet on AI, as I mentioned in my article Tech Support Provided (China Daily Global Edition, April 9, 2020), in which I mentioned that other countries could have learned from China’s use of AI and big data in the fight against the coronavirus. In that article, I also mentioned that China is at the forefront of new technologies. The digital yuan is a great example of new technologies applied to the area of payments, but China is at the forefront of blockchain technology as well as AI.

Indeed, in 2017, the central government set its sights on being the world leader in AI by 2030, announcing a massive $150 billion investment that far exceeded the capacity of any other country. According to a study by the World Intellectual Property Organization in 2018, China already owned 57 percent of the registered AI patents, and 17 of the 20 leading AI institutions in the world were Chinese.

Can there be a metaverse without cryptocurrencies? The metaverse and crypto are two concepts that may exist separately. A token may have utility in both real and virtual worlds, but the concepts need to have a clear synergy with each other.

What about Hong Kong? The metaverse industry is booming in the city, since a myriad of companies are currently working on metaverse-related projects and applications.

Following a question by Legislative Councilor Tan Yueheng and a written reply by Secretary for Innovation, Technology and Industry Sun Dong in the Legislative Council on Nov 30, 2022, Professor Sun said: “Currently, Hong Kong possesses excellent information and communication technology environment and robust infrastructures such as high-speed communication networks, 5G mobile networks, and a vibrant cloud computing service market. They could facilitate local industries and research institutions to develop technologies related to the metaverse. … On the other hand, the development and application of digital currency will facilitate the development of metaverse industries and applications. Since 2017, Hong Kong has been examining the feasibility of the central bank digital currency.”

To sum up, the metaverse will quite likely become an important industry in China in the coming years, albeit a metaverse with Chinese characteristics, i.e., without cryptocurrencies, but with a huge potential nonetheless. In Hong Kong, the metaverse industry is booming too; and it will be possible for the city to leverage digital assets, even more so now that, as announced during the 2022 Hong Kong Fintech Week, Hong Kong’s pivoting toward a friendlier regulatory regime for cryptocurrencies shows that it is ready to become an even more important virtual assets center/crypto hub, and that the “one country, two systems” principle is working perfectly.

The author is a fintech adviser, researcher and a former business analyst for a Hong Kong publicly listed company.

The views do not necessarily reflect those of China Daily.