R&D, hard tech, metaverse can spur digital economy
As China's two sessions wrapped up last month, this year's Government Work Report highlighted the efforts of developing the digital economy, expanding digital information infrastructure, applying 5G technology on a larger scale and advancing digitalization of industries.
During the two sessions, some lawmakers and political advisers also made proposals and suggestions on developing the metaverse as it has become a key topic in digital economy discussions.
Media reports found that cities like Wuhan, Hubei province; Hefei, Anhui province; and Chengdu, Sichuan province, have already included metaverse development and regulation in their local government work reports. Shanghai and neighboring Zhejiang province clarified the development direction of the metaverse in their relevant industrial plans.
The country's Government Work Report this year did not directly mention the metaverse, which, in my opinion, is because although the metaverse has been hyped for half a year, it does not yet have a clear, unequivocal and agreed-upon definition.
The metaverse is a very big concept that most only comprehend peripherally. For me, the definition with the most explanatory power is any that describes the metaverse as not being a static state, but a dynamic process.
More specifically, it is a dynamic process in which the real world and the online virtual world penetrate, integrate and promote each other. During this process, the two parallel spaces become fully integrated with one another, and the whole process can be described as transcendent.
Although not technically included within, the metaverse is very important to the digital economy. The digital economy is the future of economic and social development and the COVID-19 pandemic has also accelerated the evolution of the overall economy from offline to online.
The digital economy is closely linked to the real economy and is not merely a virtual concept. It is a series of economic activities that use data resources as key production factors, modern information networks as important carriers and effective use of information and communication technology as important driving forces for efficiency improvement and economic structure optimization.
Thus, the digital economy has obvious "scale effects", that is to say, whoever invests a lot in the early stage and builds the infrastructure efficiently may see growing advantages down the road.
The metaverse, as an evolutionary direction of the digital economy, points out an important direction for digital infrastructure investment. The development of the country's digital economy is also rapidly advancing in the direction of eight core elements of the metaverse, namely－identity, variety, friends, ubiquity, immersive, economy, low friction and civility.
For example, digital payment modalities like digital renminbi, the emergence of high-quality homegrown games, the progress of the country's chip industry as well as augmented and virtual reality all have laid a solid foundation for the future of the country's digital economy.
At present, the development of China's metaverse is in an exploratory stage with technical preparations, but has not yet actually been commercialized. Judging from existing underlying technologies such as AR/VR, 5G networks, brain-computer interfaces and AI, it will take time for the country's metaverse to truly get out of the gate.
Currently, the production process and demand structure of the existing non-virtual world have not been transformed, and the business model of online and offline integration continues.
In February, the China Mobile Communications Association, an industry group based in Beijing, launched a self-disciplined convention proposing that "the role of the metaverse should be focused on serving the real economy, and we must resolutely resist the use of the concept of the metaverse for capital speculation to avoid market bubbles".
This shows that the development of the country's metaverse has surpassed the stage of conceptual speculation and is steadily advancing toward specific commercial applications.
China has its unique advantages in developing the metaverse. First, the country has advantages in human resources as the Chinese people are known for their diligence and creativity.
Second are cultural advantages. A key element of the penetration of the metaverse is to have classic IP, or intellectual property. Chinese culture has a long history and will play an important role in the fusion of real and virtual worlds.
Third are infrastructure advantages. The development of the country's digital economy has gained great momentum. According to several government planning documents, the number of gigabit broadband users, registrations for industrial internet logo, 5G base stations per capita and the computing power of data centers are expected to achieve average annual growth rates of 56 percent, 40 percent, 39 percent and 27 percent, respectively, in the following years.
With the support of more and more government funds, more capital will pivot to focus on research and development in areas such as "new infrastructure". It is important because the quality and quantity of infrastructure will directly determine the depth of metaverse development.
Also, hard technology is key to the development of the metaverse, and the orderly guidance of the government will help it achieve stability and long-term growth.
But breakthroughs in hard technology are inseparable from long-term investment in basic R&D. Productive forces determine relations among producers. Without the accumulation of productive forces, the metaverse is just a utopian chimera.
That is why the concept of the metaverse appeared in science fiction as early as 1992 but has not become a near reality until today. It is increasingly taking shape nowadays because the current productive forces of human society can support its construction.
Science and technology are now becoming the primary productive force behind the concept. The key point of China's digital economy development is to continuously promote scientific and technological progress, especially with regard to investment in basic science.
However, the metaverse is an emerging phenomenon, and has led to debate on aspects like value ethics, benefit distribution, rulemaking and virtual space management and control in early stage of its development.
In my opinion, the guidance, planning and governance of government departments are very important for the stable development of the metaverse.
My suggestions are as follows:
To start with, more efforts are needed to improve the economic incentive mechanism to prevent the platform from monopolizing data and algorithms, and allow the platform to truly hand revenue control to developers.
Second, the government should protect the legal rights of individuals in the metaverse, including reexamining the boundaries of virtual crime and exploring legal protections of property rights, privacy rights and basic human rights in the metaverse.
Third, the government is expected to strengthen supervision over virtual assets such as NFT, or non-fungible tokens, and promote the development of digital renminbi.
When digital renminbi is further promoted, more steps are needed to ensure the stability and security of the payment system in the metaverse and at the same time launch financial supervision of NFT assets to effectively protect the rights and interests of investors.
The writer is chief economist at Hong Kong-based ICBC International.