Companies are racing to build devices and software to shape a virtual market that Morgan Stanley estimates will eventually be worth $8 trillion in China alone

China’s tech giants are finding the call of the metaverse just as irresistible as their US counterparts.

Companies such as Tencent, ByteDance, NetEase and Alibaba are racing to build devices and software to shape a virtual market that Morgan Stanley estimates will eventually be worth $8 trillion in China alone.

‘Yuan yu zhou,’ the Chinese translation of metaverse, has become a buzzword with the China National Intellectual Property Administration (CNIPA) receiving at least 16,000 trademark applications containing the term as of February.

While the full realisation of the metaverse, pitched as an ever present interconnected ecosystem of virtual worlds that replicate real life, is years away, aspects of it are already in use, such as augmented reality (AR) and virtual reality (VR) devices.

Karin Kong, chief analyst of global technologies at TF Securities in Shanghai, sees social networking and gaming as the top applications in the first stage of the metaverse, which she says will run until 2030.

Enthusiasm for China’s metaverse is building against an unpredictable regulatory backdrop.

Beijing has cracked down on the tech sector, tightened oversight of the gaming industry and banned transactions in cryptocurrencies – all vital components of the virtual realm. The metaverse is also viewed as a national security risk.

Still, recent moves suggest that Beijing is not going to miss out on the next big thing in tech – it just wants its own regulated version.

Government officials, both at the central and local level, have blessed metaverse applications in the manufacturing, education, cultural and tourism industries with their approval.

On April 11, the authorities lifted a seven-month freeze on publishing licences for new video games, although titles by industry giants Tencent and Netease were conspicuously absent from the list of approvals.

A Metaverse Industry Committee set up in October by the China Mobile Communications Association to set standards now has 145 members.

Ivan Su, an equity analyst at Morningstar, says companies are bound to be more cautious and that could slow the pace of monetisation and limit the creator economy.

According to Rupantar Guha, principal analyst at GlobalData’s thematic research, firms may rely heavily on content that’s already been cleared rather than wait for fresh approval. The pace of foreign investments will be slow, he said.