Metaverse – the reason Xi’s crackdown on China’s tech industry isn’t working
VSChina’s crackdown on tech companies grabbed global headlines last year, but it’s still too early to consider it the final nail in the coffin. President Xi Jinping could face a rude awakening as industries hit hard by the policy enacted under the “Common Prosperity Campaign” now resist its removal and ride out the regulatory storm.
Is there a twist in the story of the Chinese president? Maybe, and it could wear the face of American tech mogul Mark Zuckerberg and his crypto-infused Metaverse.
Last July, Beijing sent shockwaves through a multibillion-dollar industry by announcing a ban on off-campus tutoring companies. After months of monitoring companies, the finding contributed to a 92% drop in after-hours tutoring services.
US-listed New Oriental, one of China’s largest tutoring firms, suffered the most. The company had to lay off 60,000 employees last year and has so far posted losses of around $907 million since last November. However, the founder and chairman of New Oriental, Yu Minhong, is not giving up yet.
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Yu recently debuted in a live e-commerce show, which achieved sales of $785,000 in a short period. The former electronics tech giant now sells agricultural products such as rice, beef, oranges and apples – the same products you can buy at any Chinese grocery store – at a markup.
Even tutoring companies are trying to bounce back by finding ways to offer their services through alternative advertising or switching to a one-to-one model.
In January, authorities sought to further crack down on “disguised school support” services, which tried to rebound during the winter break. These companies now market their services under names such as “thought training” or “home economics services”.
Following the crackdown, videos of mothers teaching young children went viral on Weibo, China’s equivalent of Twitter. The videos show parents struggling to teach their children and sobbing alongside the children. “It turns out that it is too difficult for mothers to help children with their homework,” wrote a Weibo user, suggesting that the tutoring ban was not going well for parents either. .
Xi’s crackdown on internet-related technologies has sought to establish the new rules of compliance and regulation. Chinese companies believe they can navigate the complex regulatory environment while building on bold ideas. One such idea is Metaverse.
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The buzz around China’s Metaverse – virtual and augmented digital realities – emerged after Zuckerberg’s marketing pivot to the world. The Metaverse could emerge as an $8 trillion industry, but tech companies are using the recent crackdown as a roadmap to target this trend.
They are betting big on using the government’s compliance regime to create a “metaverse with Chinese characteristics”. Metaverse technologies in the United States and elsewhere are tied to cryptocurrencies, which are completely absent from the Chinese metaverse currently in development.
Investment opportunities related to the metaverse are the new talk of the town in China. Everything from a coaching session and courses is offered on Metaverse. But the buzz has already generated fraudulent investments and scams trying to lure people in with the promise of virtual reality (VR). “Risk warning on preventing illegal fundraising on behalf of Metaverse,” the China Banking and Insurance Regulatory Commission said in its warning on the new scams.
There is even an entity responsible for regulating the development of Metaverse – the Metaverse Industry Committee – which was set up by state-owned China Mobile to regulate the burgeoning technologies related to the Metaverse.
“Illegal financial activities, such as making fake Metaverse investment projects and issuing Metaverse virtual currency, should be fought,” China Mobile said.
But fraud warnings don’t stop entrepreneurs.
Jelly, a metaverse app, became the most downloaded free app on the iOS store in February, just three weeks after its launch. The app even beat Tencent Holding’s WeChat in number of downloads on the iOS store.
Jelly allows people to create a virtual reality character of themselves – down to fashion choice – who can interact with up to 50 close friends in the app. But the app ran into problems after people who signed up started receiving unsolicited marketing calls. There is speculation that Jelly user data may have been leaked. The app has now been removed from the iOS store.
China is still lagging behind in the development of VR-based headsets such as Meta’s Oculus available in the United States. But companies like Alibaba and Tencent are pooling their resources to develop a range of technologies around the Metaverse buzz. More than 1,000 companies have applied for 16,000 metaverse-related marks in the last year alone. But only a handful of them have been approved.
Things could change with Beijing’s crackdown.
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The “campaign for common prosperity” is seen as the driving force behind the repression. China watchers have observed that Xi’s campaign was not widely discussed at the latest session of the National People’s Congress (NPC) in Beijing. The dilution of common prosperity may signal that Xi has set the rules of the road for now. Tech companies are just supposed to follow them.
Beijing is also simultaneously trying to reassure investors who have grown weary after the crackdown season in 2021. “We will promote the development of venture capital,” said Li Keqiang, Premier of the State Council, during the meeting. opening session of the NPC.
The golden age of tech entrepreneurship in China is not about to end. Entrepreneurs try to resist. And more is yet to come.
The author is a freelance columnist and journalist. He is currently pursuing a master’s degree in international politics with a focus on China at the School of Oriental and African Studies (SOAS), University of London. He was previously a Chinese media reporter at the BBC World Service. He tweets @aadilbrar. Views are personal.
(Edited by Srinjoy Dey)