When explaining what “the metaverse” might look like, many Chinese investors and tech entrepreneurs refer to the Oasis — a fictional virtual world where people “can do anything, go anywhere” after donning a virtual reality headset: like, “surf a 50-foot monster wave in Hawaii, ski down the Pyramids, or climb Mount Everest with Batman,” as depicted by the protagonist Wade Watts in the 2018 science fiction movie “Ready Player One.”

A combination of “meta” (a prefix from Greek for “after” or “beyond”) and “universe,” the term metaverse was originated by US science fiction writer Neal Stephenson in 1992. It was a niche term favored by techies and gamers to illustrate the next iteration of the internet, an immersive, sensory 3D online experience. But in 2021, “metaverse” may have become the buzzword of the year, much thanks to tech companies like Roblox and Facebook (now Meta), as they paint a future in which people play games, shop, exercise, work, learn, and do other things in various virtual spaces. 

The concept caught on in China this year as well, with companies quick to invest in the metaverse. But the Chinese market has its own set of tech giants, internet culture, and regulatory norms. TechNode talked to several investors and tech companies in the metaverse-related fields, hoping to provide some clues on how China reacts to the popular concept.

A few takeaways: Chinese venture capitalists (VCs) have for years been investing in technologies central to the metaverse, making the country well-prepared for developing its own leaders in the space. The VCs agree that technologies that serve to build the infrastructure of the metaverse are probably the smartest investments since it’s too early to tell which app or companies will dominate. 

Moreover, China may become the first place in the world to have a full metaverse experience. The Chinese government is watching the phenomenon closely and talking to companies to learn more about the metaverse, Chinese tech executives told TechNode. 

How did the metaverse concept become popular in China?

In March, US gaming platform Roblox went public in New York, quickly hitting a $38 billion market cap. In its prospectus, Roblox said, “some refer to our category as the metaverse, a term often used to describe the concept of persistent, shared, 3D virtual spaces in a virtual universe.” 

Roblox’s successful IPO debut popularized the metaverse, and over the ensuing months, it became a buzzword in the US. At the same time, some communities in China started similar discussions but kept most within the investing, tech, and gaming circles.

Metaverse entered into the Chinese mainstream conversation in August when TikTok’s owner ByteDance acquired Chinese virtual reality (VR) gear maker Pico for a reported RMB 5 billion ($783.6 million) (in Chinese). Pico accounts for 33.6% of the market in the second quarter of 2021, according to IDC’s Augmented and Virtual Reality Headset Tracker.

In the first 10 days following the ByteDance acquisition news, searches and interest in the metaverse surged on the Chinese internet. On superapp WeChat, the popularity of “metaverse,” based on published articles and videos, rose 13-fold, according to WeChat’s trend index. Searches of the term rose 19 times on top search engine Baidu, Baidu Index showed. 

Aside from ByteDance, other Chinese tech giants like Tencent, Alibaba, and Baidu have shown interest in metaverse-related projects. 

“We felt that we have a lot of tech and capability building blocks that will allow us to approach the metaverse opportunity” through multiple pathways, Tencent Chairman and CEO Pony Ma said in the company’s third-quarter earnings call on Nov. 10. Specifically, metaverse can be an opportunity to add growth in gaming, social networking, and business applications, Ma said in the call.

Alibaba Cloud, a subsidiary of the e-commerce giant, announced a “metaverse” solution in November. An Alibaba spokesperson said the solution integrated many of the company’s proven technologies to provide support for metaverse-related applications. The solution includes services such as remote rendering, blockchain as a service, and data analytics.

Baidu Vice President Ma Jie said at a Nov. 2 Baidu AI event (in Chinese) that the company plans to lower the production cost for content creation in the metaverse by developing VR content platforms and VR interactive platforms, leveraging the company’s AI technologies. “Baidu would love to work with customers, developers, and users to create a multi-person interactive world of the metaverse and develop new applications,” Ma said.

What do Chinese investors and tech leaders think of the metaverse concept?

The following four interviews have been edited for clarity and brevity. Quotes from Feng Zheng of Shunwei Capital, Yang Ge of Sky Saga Capital, and the two co-founders of Reworld were translated from Chinese:

1. Chinese investors have invested in tech that would be useful to the metaverse for years

Feng Zheng, vice president of Shunwei Capital

Note: Shunwei Capital is a Beijing-based venture capital fund that focuses on the tech sector. It has been investing in technologies that would be useful in the metaverse for years. 

“Metaverse is a very distant concept,” Feng said. “I think it’s a vague conceptual term, leading many people to come up with different interpretations. Shunwei doesn’t have a metaverse-specific investment bracket. We have just been investing in things in the virtual direction because we were following the natural evolution of technologies.”

For example, in 2014, Shunwei invested in Agora, a company that allows other applications to embed real-time audio and video communications. The company provides tech backend for the live audio platform Clubhouse. In 2017, Shunwei led in pre-Series A of Style3D, a virtual apparel design platform, providing clothing companies with 3D clothing and virtual fashion concepts. In 2018, Shunwei invested in Kujiale, a 3D interior design platform, providing 3D design templates for home construction and renovation companies. Last year, Shunwei exclusively invested in the pre-Series A of Next Generation, a startup focusing on creating AI-generated virtual humans and virtual idols. 

Feng said Shunwei “has been seeing brand new opportunities and trends in the past couple of years, thanks to gradual tech advancements in AI, 3D rendering, video, audio, computing power, and the next-generation 5G network. The improvements are like new Lego bricks. With these new bricks, we can create and build things that weren’t possible just a few years ago. Internally, we call the space ‘the virtual world sector.’ We are investing in companies that provide 3D infrastructure, such as virtual humans, which we believe will be the core of communications in the virtual world. 

“I think virtual humans might be the apps in the virtual world. For example, a fitness app in the virtual world won’t be what it is today. We may have a cool-looking avatar guiding us and interacting with us. Most Chinese firms’ investment logic will be similar: starting from infrastructure and then looking for applications that can be implemented today. Shunwei might invest a bit more on the applications front, such as 2D, 3D applications. But we aren’t looking for an all-encompassing app that will dominate a large part of the virtual world. It’s too early for that kind of app, and no one can imagine what that will be like.”

2. ‘We prefer to invest in the infrastructure of the metaverse’

Yang Ge, co-founder of Sky Saga Capital (SSC)

Note: Yang said SSC, a Beijing-based venture capital firm focusing on smart manufacturing, internet tech, and AI, chose to invest in companies that provide the infrastructure to the metaverse, such as AI and virtual human-related companies. 

“We prefer to invest in companies that are building underlying tech infrastructure and the environment of the metaverse,” Yang said. For example, in 2018, SSC invested in the seed round of a company called Rct AI, which provides AI solutions and AI-generated content. In 2019 SSC invested in Xianyi Numa, a company that specializes in providing facial expressions to computer-generated virtual humans. It also helps design storylines for these virtual humans.

Yang said “the metaverse will require a large number of environments to be built and a large amount of content. So this year, a very important term is ‘AIGC,’ meaning content generated by artificial intelligence. The crucial thing in the metaverse is to use AI engines to create various types of content and form a communication environment, which serves as the base layer of the space. You can think of AIGC as the infrastructure of the metaverse.

“The next generation of internet giants will be different from the current ones. But most differences will lie on the surface level, on the presentations. The company structures and fundamentals will stay the same, such as their operational management, maintenance, and internal concept of the community. People’s needs will remain the same. They will still need to make friends, communicate and commerce online. But all those actions will look in a very different form than what we have now.”

3. China might be the first place where people get to have a full metaverse experience

Alvin Wang Graylin, China president of HTC. 

Note: Taiwanese electronics maker HTC runs a virtual reality (VR) brand called HTC Vive, offering mid to high-end VR headsets, VR hardware, and open app stores for VR games and applications. In the high-end VR headset market in China, HTC accounted for 70% of the market share in the third quarter, according to data shared by GfK, a market research firm based in Germany. A high-end VR headset usually costs more than RMB 5,000 ($784). 

“Metaverse is not something where you go from zero to one. I was on the internet yesterday. Tomorrow, I’m in the metaverse. No, it’s not going to happen like that. It’s going to develop over the next five to ten years. I think within the next few years, we will see pieces of this becoming more mature…It will for sure happen within 10 years, and a lot of it will happen within five years. 

“I don’t know if in China it makes sense to copy the Western models (i.e., Facebook, Roblox). Maybe when the internet started, that’s how we developed some of the initial internet applications or mobile applications. But I feel like in some ways, China may be ahead and may have different models to develop and progress the industry faster. One of the things that’s a little bit different in China versus the rest of the world is that in China, the government supports the virtualization and digitization of its economy and encourages various industries to adopt more advanced ways to utilize new technologies. Whereas you look at the rest of the world, private businesses are left on their own trying to create that.

“It’s difficult to get 1,000 companies and 200 countries to agree. But, if you get one country that is much more centrally managed, I think it’s easier for the government to say, okay, you will use the Chinese digital currency and they will work across all of these worlds, or you will use the resident identity card as your key ID system, but we will let you change your avatar, right? I mean, this is an example. It’s more so the fact that the country can say that and then all the companies in the country will have to follow. So, you may have the first full metaverse experience happen in China.”

4. The Chinese government is paying close attention to the metaverse 

Yao Guangshi, CEO and co-founder of Reworld, and Dong Yupeng, co-founder of Reworld. 

Note: Founded in 2018 in Beijing, Reworld offers a platform for users to play, and design their own 3D games and other content. Reworld experiences are often compared to those on the US gaming platform Roblox. In April, Reworld raised RMB 100 million ($15.7 million) in a strategic round from ByteDance. Before the ByteDance investment, Reworld had raised $56.8 million in two rounds from lead investor Joy Capital. To compare, Roblox had raised $856.7 million in 10 rounds from 2005 to this year, before it went public this March. 

“Games often have a clear structure and model. They would incentivize players to chase the goal and reward players once they achieve the goal…But metaverse requires a greater degree of openness. It’s more like a social space. It will provide you with all kinds of scenes, and you have the freedom to choose which to interact with. Gaming would be one of many scenes to choose from. 

“In the future, apps in the metaverse may borrow some features from games. For example, if I build a 3D supermarket with tens of thousands of square meters. I may build different sections for electronics, produce, and others. I may also build some gamification scenes to incentivize people to buy, like giving you more enhanced details of the things you want to buy. But you won’t call the supermarket a game. 

“We recently attended a metaverse-related forum discussion organized by a Beijing municipal government agency of economic and informatization. They were very enthusiastic about the trend and had a few projects that wanted companies to take part in. They also see this as a new competition area in the tech and internet industry around the world. I can sense that the Chinese government is very quick to react to new tech trends like the metaverse. It’s probably a good thing for China.” 

Update: The article was updated to include four paragraphs about Chinese tech giants’ metaverse-related moves in the second section.

Qin is the managing editor at TechNode. Previously, she was a reporter at the South China Morning Post's Inkstone. Before that, she worked in the United States for five years. She was a senior video producer...