Over the past several years, China has become a formidable competitor to the United States in several key technological areas, especially artificial intelligence and blockchain technology. According to Chinese President Xi Jinping, in a speech to the Chinese Academy of Sciences in May 2018, “[e]ver since the start of the 21st century, a new generation of industrial revolution is substantially reshaping the global economic structure,” based on artificial intelligence, the Internet of things and blockchain.
The global blockchain technology market is big and getting bigger – in fact, it is estimated to reach USD 7.59 billion by 2024, according to a report by Grand View Research, Inc., with increased demand driven by financial services, consumer or industrial products, technology, media and telecom, healthcare, transportation, and public sectors.
Chinese firms took 57 spots in a newly compiled “Top-100 Blockchain Enterprise Patent Rankings” list, according to IPRDaily, a global intellectual property information media outlet. UHY, an international accounting and consultancy network, analyzed recent patent filings with the World Intellectual Property Organization (WIPO) and found that Chinese businesses filed 32 percent of all global patents for blockchain technology in 2017 with 99 patents from a total of 314 filed. US businesses were a close second, filing 29 percent of all global patents for blockchain technology. In other words, in the world of blockchain, China is racing ahead.
China is walking a particularly unique tightrope, more challenging than even that facing the United States, because on one hand, it has taken a decidedly hostile position against cryptocurrency – particularly investment speculation, trading, and now even mining activities – while at the same time China is wholeheartedly embracing the blockchain technology underpinning digital currencies. The People’s Bank of China (PBOC) banned financial institutions from handling Bitcoin transactions in 2013, and China has resisted liberalizing its approach to any digital currency that could rival the yuan. China does not recognize cryptocurrencies as legal tender, and the banking system does not cryptocurrencies or providing related services.
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In 2017, the Chinese government took several high-profile regulatory measures to protect investors and reduce financial risk, including announcing that initial coin offerings are illegal, restricting the primary business of cryptocurrency trading platforms, and discouraging cryptocurrency mining. Bitcoin trading in the Chinese currency, renminbi (RMB), fell to less than 1 percent of the world’s total, from a peak of more than 90 percent, according to the People’s Bank of China (PBoC). China’s actions halted cryptocurrency speculation and prevented widespread fraud and manipulation, sparing many Chinese investors from the extreme volatility and tremendous losses sustained throughout 2018.
Hong Kong’s Securities and Futures Commission (SFC) issued a warning to investors that tokens issued via ICO may be classified as securities, and that the Commission is “concerned about an increase in the use of ICOs to raise funds in Hong Kong and elsewhere”. In a public notice in September 2017, the SFC urged investors “to be mindful of potential scams as well as the investment risks involved in ICOs. As ICOs operate online and may not have a presence in Hong Kong, investors may be exposed to heightened risks of fraud.”
These regulatory changes have had a significant impact on global cryptocurrency markets, since China was a major player both on the trading and mining side, but it has not curtailed China’s blockchain boom. In fact, over the past couple of years, China has emerged as a dominant player in blockchain technology, and in some key areas, even surpassing the United States.
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The Chinese Communist Party website recently released a primer on blockchain technology that includes an overview on its key features, use cases, and challenges. In a particularly salient quote the author exhorts: “We call on the industry peers to continue to look at the blockchain technology with a development perspective. Looking at the blockchain label from a scientific perspective, look at the blockchain industry with a strategic eye, look at the blockchain business opportunities with a calm eye, promote the sustainable and healthy development of the blockchain industry.”;
China’s central bank, the PBoC, is supporting the development of a blockchain-based trade finance platform that will streamline interbank payments and help SMBs get access to a wider range of financing tools. China’s Supreme People’s Court recently established new rules of evidence confirming that blockchain technology is an approved method for storing and authenticating digital evidence. The Bank of China, while decisively rejecting transactions or custodial services involving cryptocurrency, is nonetheless planning to aggressively invest in the development of fintech and blockchain technology.
Made in China 2025 (MIC 2025) is a 10-year, comprehensive blueprint with an ambitious goal – to transform China into an advanced manufacturing leader. According to the U.S. Chamber of Commerce, Made in China 2025 provides preferential access to capital to Chinese companies to help promote their research and development capabilities, support their ability to acquire technology from abroad, and improve their overall competitiveness.
China’s efforts seem to be bearing fruit. According to a review by Thomson Reuters of patent applications from the World Intellectual Property Organization (WIPO) database in 2017, more than half of the 406 blockchain related patent applications hailed from China.
In addition to China’s tech giants, like Baidu, Alibaba, and Tencent, which have been investing heavily in the blockchain, the emerging technology scene that is generating a lot of excitement right now. For example, MATRIX AI Network, a global open-source, public, intelligent blockchain-based distributed computing platform and operating system that combines artificial intelligence and blockchain announced in 2018 that it secured a strategic partnership with China’s trillion-dollar One Belt One Road (OBOR) initiative, an ambitious state-sponsored effort to recreate the ancient Silk Road by connecting 65 countries with advanced logistics, financial clearing and payment processing via blockchain.
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The proliferation of blockchain technology, with the support and encouragement of the Chinese government, is ushering in an unprecedented era of advancement in healthcare, fintech, logistics, supply chain management, e-commerce and more. Not so long ago, China was accused, not unfairly, of copying the world’s best technology. But when it comes to the blockchain, it is looking more and more like the world is racing to copy and catch up to China.