That ban helped set the path for the development of the Chinese metaverse, experts say, since it decoupled virtual spaces from digital assets. “The key difference [in the metaverse] between China and the rest of the world is it’d be heavily regulated in a centralized manner,” says Zhengyuan Bo, a partner at China-focused research firm Plenum. “And there’s only limited space for growth without [digital assets] for monetization.”

It isn’t just crypto that the government has cracked down on. Gaming—which has formed a pillar of the metaverse in the West—has also come under pressure from the top. Amid fears that young people were becoming addicted to online games, state media dubbed the industry “spiritual opium.” Between  2018 and 2022, the government froze the issuance of licenses for new games for 17 months in total and, in 2021, limited minors to three hours of gaming time per week.

But the government is willing to back pieces of the metaverse that it feels could be directly beneficial to the economy. Digital twins were included in Beijing’s 14th Five Year plan, the enormous economic strategy document that sets the national agenda from 2021 to 2025. An action plan published late last year by five ministries, including the Ministry of Industry and Information Technology, promised to grow the virtual reality industry to 350 billion yuan ($51 billion).

The high-level plan identified innovations they’d like to see more of, including near-eye display (a way to project images onto a user’s eye); rendering processing (turning 2D or 3D models into realistic images), sensory interaction, and network transition.

But support from the government is conditional—Beijing has a vision for what metaverse tech is going to do for China. That means, instead of a virtual world where people can socialize, work, and play, the metaverse needs to serve China’s physical economy.

“At the current stage, everyone emphasizes industrial applications from education, medical, travel and industrial development,” says Siri Chen, HiAR’s marketing director, speaking from the company’s headquarters in Shanghai’s Zhangjiang Hi-Tech Park. In a demo for WIRED, a HiAR employee acted as a factory worker in a HiAR headset and was remotely asked to fix a valve.

Other metaverse-related companies have pivoted in anticipation of investment from the government. For Eric Liu, cofounder and CTO of Shanghai-based digital twin company Digitwin Technologies, the 14th Five Year Plan has helped underpin his company’s shift to focus on energy and manufacturing—“a field that previously wasn’t ready” for this kind of tech, he says.

While the Chinese government’s desire to shape the metaverse may limit its scope, state support may mean it doesn’t fall victim to the notoriously fickle tech sector, which moves on from trends at great speed. Startups often try to be “in the middle of a whirlwind,” meaning the right trend with an explosive growth potential.

“If anything gets buzzy in China, you see companies swarm into the space,” says Jingshu Chen, cofounder of VR company VeeR. “However, if growth isn’t as fast as their expectation, more companies are also likely to pivot.”

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