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ANALYSIS-A metaverse with Chinese characteristics is a clean and compliant metaverse

By Eduardo Baptista
    BEIJING, Jan 26 (Reuters) - How will China's metaverse
evolve? Look to the letter "c". Clean, censored, compliant and
crypto-less is the view from experts.
    The descriptions point to the long shadow thrown by Chinese
authorities who have already intimated they will have a heavy
regulatory hand in how it will develop - a shadow some China
metaverse advocates fear will stunt its growth.
    From Microsoft's  MSFT.O  $69 billion plan to buy Activision
 ATVI.O  to Facebook changing its name to Meta Platforms Inc
 FB.O , much of the tech world is leaping to build what many
expect will be the next generation of the internet: immersive
virtual worlds that replicate many aspects of real life.
    Experts say China's metaverse efforts lag countries such as
the United States and South Korea, citing less investment by
domestic tech giants. Industry-leading products like Meta's
Oculus virtual reality (VR) headsets are banned in China and the
slow development of attractive domestically made VR headsets has
meant China has yet to see a VR platform or metaverse gain
significant popularity.  
    But interest has begun to surge. In the past year, more than
1,000 companies including heavyweights such as Alibaba Group
Holding  9988.HK   BABA.N  and Tencent Holdings Ltd  0700.HK 
have applied for around 10,000 metaverse-related trademarks,
according to business tracking firm Tianyancha.
    Baidu  9888.HK   BIDU.O  broke new ground in December with
the launch of "XiRang", described as China's first metaverse
platform though it has been widely panned for not offering a
high-level immersive experience. Baidu says its app is a work in
progress.
    Start-ups too are seeing more investment. In the three
months to end-November, more than 10 billion yuan ($1.6 billion)
was invested in metaverse-related ventures, far more than the
2.1 billion yuan of investment that China's VR and related
industries attracted for all of 2020, according to Sino Global,
a crypto venture capital firm focused on China.
    "Investors and venture capital managers who hadn't talked to
me in years were suddenly messaging - asking if I want to go for
a meal and talk. They all want to talk metaverse," said
Beijing-based Pan Bohang whose startup plans to launch a VR
social gaming platform.
    
    A REGULATED REALM
    Experts say the infancy of China's metaverse allows Beijing
plenty of room to co-opt its development, particularly since the
current metaverse buzz has coincided with an unprecedented
regulatory crackdown on tech and other industries.
    "Traditional Chinese internet businesses developed first and
were then regulated. Industries like the metaverse will be
regulated as they are built," said Du Zhengping, head of the
state-backed China Mobile Communications Association's metaverse
industry committee which was formed in October.
    But China's authoritarian approach is at odds with how the
metaverse is developing in other parts of the world where users
are attracted to new ways of expressing themselves, and it will
stifle growth, says Eloi Gerard, a VR entrepreneur who worked in
China for 10 years before recently moving to Los Angeles.
    "The metaverse is already a place where you have religious
groups, LGBT movements, gathering all around the world and using
the virtual world to share ideas, this is what people are doing
on VRChat right now…it is crazy progressive and liberal," he
said, referring to a popular San Francisco-based VR platform.
    "The idea of the metaverse is that one moves between virtual
worlds...this goes immediately against the idea of one party,
one voice, one vision."
    Experts also note that gaming - considered the gateway
technology to the metaverse - is tightly regulated in China.
    Games must be approved by the government and while battle
games are allowed, strong violent content such as the depiction
of blood and dead bodies is banned, as is anything that can be
construed as obscene. As part of their recent regulatory
crackdown, authorities have also sought to rein in gaming by
minors as well as excessive adulation of celebrities and money.
    Gaming giants such as Tencent and NetEase Inc  9999.HK 
 NTES.O  have been quick to state publicly that they will comply
with any rules while developing metaverse offerings.
        
    THE GOVERNMENT'S REACH 
    The long arm of the government looks set to be duly felt in
other ways too. An influential app, Xuexi Qiangguo, which is
required reading for many Communist Party cadres, published an
article in November that said the metaverse should be used to
improve the quality of mandatory ideological education classes
for school children.
    At a January meeting of Beijing's municipal political
advisory body which discussed the metaverse's development,
proposals included a registration system for metaverse
communities aimed at preventing them from influencing wider
public opinion and causing economic or financial shocks,
according to a state media report.
    And while crypto currencies have become a defining feature
of many Western metaverse worlds - they are notably absent in
China's metaverse as they have been banned by Beijing. Instead, 
the manifold forms of Chinese digital payment already in use,
like the central government's digital yuan, will likely take
their place.
    Despite the many probable restrictions, some entrepreneurs
say China's metaverse will flourish simply because of Chinese
consumers' willingness to try new forms of online entertainment.
    Nikk Mitchell, whose company is in talks about metaverse
projects based on Chinese stories that will play up elements
such as Chinese calligraphy and traditional costumes, is one
such believer, noting progress in domestic VR glasses and
content.
    When Chinese consumers are ready to give this
metaverse-related tech another shot, "then there will be mass
adoption at a level that I don’t think will happen in the West
nearly as quick," he said.   
    

 (Reporting by Eduardo Baptista; Additional reporting by Yingzhi
Yang; Editing by Brenda Goh and Edwina Gibbs)
 ((Eduardo.MonteiroBaptista@thomsonreuters.com;))

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