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How China Threatens to Splinter the Metaverse

In the future, the metaverse could be split into two: China and the rest of the world.

Screenshot 2022 07 27 at 10.04.57
PHOTO-ILLUSTRATION: JACQUI VANLIEW; GETTY IMAGES

WHEN MARK ZUCKERBERG announced in October 2021 that Facebook was changing its name to Meta Platforms, the news made waves well beyond Silicon Valley. Overnight, it became the talk of the town in China as well, triggering fierce debates between founders, investors, and their corporations.

It’s no surprise that the idea of the metaverse thrilled the Chinese tech community. Every few years an overarching theme emerges, rallying talent and capital. The ability to ride such waves, or better, dictate and shape them, equates to the power to capture fortunes. The metaverse promised an entire world to explore and conquer beyond smartphones, a chance to leapfrog the giants of today that have come to dominate mobile computing.

Even on a personal level, I’ve witnessed over the years countless classmates and friends grow enthralled by such cycles, chasing investment bubbles in real estate and private equity, working as civil servants for the government before moving on to build startups. Within tech, the investment themes have in the span of just a few years evolved from desktop-based social media and games to mobile messaging to online-to-offline services, and now the metaverse. And Pony Ma Huateng, the reclusive chair and cofounder of the Chinese tech conglomerate Tencent Holdings, has always been a step ahead.

Commanding an entertainment and social media empire rivaling Meta in scope, Pony Ma in fact publicly laid out a vision for building something very similar to the metaverse just a few months before Zuckerberg announced his company’s name change. Pony Ma called it the Quan Zhen internet, meaning “all-real” internet. The concept, while vaguely defined, encompasses using the web to meld manufacturing and work, and overlaps with many aspects of the Facebook cofounder’s vision. But this iteration could turn out very differently, as it will be born under the watchful eye of Beijing from day one. 

“METAVERSE” FIRST APPEARED as a word in Neal Stephenson’s 1992 novel Snow Crash, which depicted a world gripped by hyperinflation. 

 Stephenson envisioned a world based on anarcho-capitalism. And like all cyberpunk literature, the story is underlined by strong tones of antiauthoritarianism. Assuming the Chinese government sees merit in the technology, the metaverse could in the future be split into two: China and the rest of the world. Much like the internet, the world’s second largest economy will likely shield its netizens from the rest of the global metaverse.

That China’s internet industry has grown to its size today is in part because the government kept it on a loose lead while hiding it behind a firewall. The country was more preoccupied with controlling gas, oil, telecommunications, finance, and traditional media. Virtually unhindered, Western capital and local entrepreneurs found opportunities in Communist China to devise a formula that married global capital and technology with the world’s largest population.

The metaverse will be a different story. While local government officials in cities like Shanghai seem to embrace the concept, announcing their intention to encourage its application in public services, social entertainment, games, and manufacturing, others are far less sanguine. Chinese economist Ren Zeping pointed out the dangers of a metaverse, accusing it of potentially causing lower marriage and birth rates—the logic being that if people are too busy entertaining themselves in the virtual world, they wouldn’t need to seek connections in the real one.

Even matters as inherently apolitical as health policy could spur clamp downs. China is currently waging a battle against myopia among its youth, blaming gaming companies like Tencent for exacerbating the problem. A generation of children masked by VR headsets doesn’t help the cause. And that’s in addition to authorities wagging their fingers at the “lie flat” movement, a philosophy that’s gained currency among youths seeking to check out of the relentless corporate rat race.

Despite the uncertainty, companies and investors aren’t holding back when it comes to investing in and preparing for what could be the next big thing. The number of applications for trademarks related to the metaverse tripled in the three months after Zuckerberg’s switch to more than 8,500 in China.

Tencent’s making preparations as well. Martin Lau, its president, has said that the company has the technology and know-how to build the metaverse, thanks to its enormous gaming and social media cred. It’s already the Chinese local publisher for Roblox’s gaming platform, which allows users to create virtual worlds and is regarded by many as a viable early iteration of the future metaverse. Within Tencent, executives project that the industry needs at least another five years to get to the point where people will consider the technology legit. It’s not that far off. 

Yet there’s another concept on the horizon: Web3, an internet restored to its decentralized origins by building services on top of blockchains or managed and accessed on peer-to-peer distributed networks. Corporations from the Web2 era are dispatching teams internally to develop their own versions of Web3, incorporating such services onto their own platform to stay relevant. Tencent is no exception, in that it’s brainstorming ways to stake out a plot in the future internet landscape, but it faces unique constraints. 

The ideal version of Web3 “is an executable Magna Carta—the foundation of the freedom of the individual against the arbitrary authority of the despot.” The promises of Web3 are enticing enough, so much so that corporations and venture capitalists are already rushing into the space, creating memes that have made the concept somewhat amorphous. Skeptics argue it’s ironically perverting the notion of Web3, as they’re betting that it will yield the next Apple—reasserting corporate dominance in a realm that’s supposed to champion the little guy. Former Twitter CEO Jack Dorsey has become one of the biggest critics, arguing that far from democratizing the web, this current frenzy is but another tool of venture capitalists. Elon Musk has said it’s just marketing hype.

Developing Web3 in China is almost impossible, as everything about the concept contradicts the government’s central priorities, namely maintaining control over content and infrastructure. And by limiting its own technology corporations, China might lose out on what could become the next wave.

ALL OF THIS has to be enormously frustrating for someone like Pony Ma.

The self-proclaimed geek who as a child gazed at the stars and pondered how he could better the universe has in a sense realized his goal and finds himself now at a crossroads, dwelling on what legacy he will leave behind. He found his calling as one of the pioneers of the global mobile internet, linking billions to vast new realms of on-the-go mobile entertainment and communications. He helped solidify emotional connections between lovers, families, and friends, even as they ventured across the Pacific, helping them keep in touch and see each other.  Life has become so convenient that the only device needed when traveling in China is a phone. In the process, Pony Ma gained unimaginable wealth and influence beyond his wildest dreams.

Now everything may be out of his hands. The empire he’s created may have grown too vast and powerful for the Chinese government to stomach, a beast that needs to be tamed, a tool that needs to be harnessed to ensure the rule of the Party. In that environment, attempting to blaze new trails could be a minefield.       

The milieus of Ready Player One and Snow Crash don’t inspire the most faith in humanity’s future, depicted soul-crushing struggles against all-seeing, all-powerful institutions. It’s a vision that some would argue is materializing in China, which has put in place the world’s largest and most effective surveillance and control mechanisms.

Pony Ma’s conundrum is how to propel Tencent into the future while appeasing his political masters, an incredibly delicate maneuver with unimaginable stakes. Given the extraordinary achievements of the past two decades, some may argue Pony Ma is duty-bound to try. Who better than the visionary founder of the world’s largest online entertainment empire to square that circle, to fashion a formula that will work for a fifth of the global population?

And so the billionaire might not be falling back anytime soon. Perhaps it’s not even up to him. For the Party, it would be much easier to have one mighty all-knowing yet obedient company to rule all than play whack- a-mole with potentially disruptive forces.

Some choices Pony Ma has made following China Tech’s recent annus horribilis offer clues to his thinking for the future, or at least an overarching stance for public consumption and his political overlords. In the past decade, when Pony Ma reorganized Tencent and opened up the company’s platform, he wanted the company to become an infrastructure-like operation, to become the equivalent of water and electricity for the internet. Fast-forward to now, Pony Ma has made a U-turn, telling staff at an internal 2021 year-end gathering that Tencent is just a dime a dozen, a beneficiary of the vast progress the country’s made.

“Tencent is not an infrastructure-service company and can be replaced at any given moment,” local media Late Post reported him saying. “In the future, when Tencent services the country and society, the company needs to make sure it doesn’t overstep, be a good assistant.”

In the I Ching, also known as the Book of Changes, the ancient Chinese script confers a note of wisdom: that an overconfident dragon will have cause for remorse. If Pony Ma’s generation of entrepreneurs spent the first half of their lives swimming upstream like carps to leap over the gates of the Yellow River hoping to become dragons, then, following ancient wisdom, the second part of their fate lies in knowing when to bow out—or perhaps becoming part of the system they once wished to change.