China's leadership held annual Two Sessions political meetings at the Great Hall of the People in March 2022 in Beijing. Image: Getty Images

Where is China’s blockchain, digital economy heading? The upcoming ‘Two Sessions’ may give some pointers

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China’s “Two Sessions” meetings kick off Saturday for the most important annual political gatherings where authorities are expected to lay out the country’s economic plans for the year ahead and reshuffle key jobs.

Initiatives for building a digital economy are expected to be high on the agenda.

The National People’s Congress (NPC), the country’s parliament, will meet on Sunday, while the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), the country’s top advisory body, will take place a day earlier. The meetings are set to run for about two weeks.

Here are some of the digital trends to look out for.

Big plans

On Monday, China rolled out a grand digitalization plan that places an emphasis on building out a digital-based infrastructure for the economy by 2025.

According to the plan, China aims to integrate the technology into the real economy, including “the application of digital technology in the agriculture, manufacturing, finance, education, medical services, transportation and energy sectors.” It also calls for “widely accessible digital public services.”

The plan was released after China President Xi Jinping wrote in a January article that technologies, such as blockchain, artificial intelligence, 5G and cloud computing, will be major drivers for the nation’s new economy and to meet international competition. 

Threaded through this narrative is a call for “self reliance.” Iris Pang, chief economist of think tank ING Economics, wrote in a report on Tuesday that “self-reliance in advanced technology” is a key topic in meetings of top leaders.

“We believe that there will be funding from the government for both public and private research bodies to engage in R&D (research and development), with the ultimate aim of achieving self-reliance in advanced technology,” Pang wrote.

John Hemmings, a senior director of U.S. research institute Pacific Forum, said in a press briefing in Washington D.C. earlier this week that Xi’s digital China initiative has grand ambitions. 

“It’s a digital strategy that drives all efforts within China. This is not just an industrial strategy. It is not just a technology sector strategy,” he said. 

“This covers every area: political, economic, military, even foreign policy, and China’s place in the world,” said Hemmings, who published a research paper titled “Digital China: The Strategy and Its Geopolitical Implications” with another scholar in February.

Blockchain, metaverse

Despite its ban on crypto transactions, China considers blockchain technology key to its  digital infrastructure, with a growing number of Chinese local governments showing interest in Web3 development. 

At least a dozen Chinese cities and provinces have issued plans or policies to boost the growth of the Web3 and metaverse industries, including Shanghai, the country’s financial center. 

Shanghai released a policy paper in July last year to build out metaverse-related industries worth about US$52 billion by the end of 2025. 

The country also unveiled in February it is setting up a national blockchain technology research center in the capital Beijing, which has already incorporated blockchain use in its governance by building up a blockchain-based data directory for over 80 city departments.  

Pi Jianlong, a Beijing-based lawyer and a CPPCC member, told local media this week that there are emerging types of virtual properties in China that don’t fall under the category of financial properties, and that there’s a pressing need to regulate such assets.

Pi said he plans to submit a proposal at the Two Sessions aiming to speed up legislation for virtual property protection. 

Such virtual properties are often linked to real-world assets, such as wine, tea or artwork and are powered by blockchain technology and smart contracts, according to Pi. 

Pi added that the country should set up institutions dedicated to virtual property custody and verification, as the world’s second-largest economy seeks to boost its international competency in a Web3 world, or the evolution of a decentralized Internet running on blockchain technology. 

Johnny Ng, a member of Hong Kong’s Legislative Council and a CPPCC member, said last month in an interview with Chinese state media that he is interested in discussing metaverse and Web3 during the Two Sessions. 

Ng added that Hong Kong is well positioned to become a Web3 industry hub after the city released relevant policy documents last year. 

Lily King, chief operating officer of Singapore-based crypto custody platform Cobo, wrote in a February commentary for Forkast: “The Chinese government appears to be trying to replicate what it did with the internet industry in the Web2 era: to construct an ecosystem that is independent of the public blockchains in the global market — a Web3 with Chinese characteristics.” 

King added that the Chinese government sees blockchain technology and digital assets as potential sources of economic growth.

“However, all the turmoil and scandals in the global crypto industry over the past year likely only validated its perception of cryptocurrency as a threat to financial and social stability.”

GDP target

Last year, Chinese economic planners set a three-decade low gross domestic product (GDP) growth target of 5.5% for 2022, according to the government work report for last year.

Academics at the Chinese Academy of Social Sciences, a central research institute, predicted last month that China’s GDP growth may come in at only 5% for 2023.

Pang of ING Economics wrote that the market is predicting a 5.5% to 6% GDP growth target coming out of the Two Sessions, but “this will not be easy for the government to achieve even though China is gradually recovering.”

“We expect GDP growth for this year to be 5%, moving up to 5.5% if consumption and the job market are very strong,” Pang added.

See related article: How Web3 in China is taking shape — with ‘Chinese characteristics’

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