{"id":44970,"date":"2019-10-09T10:45:17","date_gmt":"2019-10-09T02:45:17","guid":{"rendered":"https:\/\/daxueconsulting.com\/?p=44970"},"modified":"2021-11-18T11:09:29","modified_gmt":"2021-11-18T03:09:29","slug":"blockchain-technolgy-china-industrial-revolution","status":"publish","type":"post","link":"https:\/\/daxueconsulting.com\/blockchain-technolgy-china-industrial-revolution\/","title":{"rendered":"Blockchain technology in China and its role in the fourth industrial revolution | daxue consulting"},"content":{"rendered":"\n

It\nis undeniable that blockchain\nis an ingenious invention\u2014the brainchild of an individual or collective of tech-savvies\nknown by the pseudonym of Satoshi\nNakamoto.<\/a> However, since its first public use in 2009, Blockchain has evolved into\nsomething much more large than what its creator\/s could have ever dreamed of.\nNot only has this\ntechnology gained recognition within the cybercommunity, but even heavyweights\nlike the Chinese government show interest in the development of blockchain technology in China\nand its role in the Chinese\ntech economy. Therefore, many understandably tend to wonder: What acutally\nis Blockchain? And what\nis the role of blockchain\nin China?<\/p>\n\n\n\n

Download our AI in China 2020 White Paper<\/a><\/div>\n\n\n\n

First\nof all, blockchain is\nthe backbone of a new type of internet technology, which allows a\ndecentralised distribution of digital information. Originally devised to\nsupport digital currencies like Bitcoin, which is often<\/a>\nreferred to as the gold standard of cryptocurrencies, the tech community is being joined by many\nresearch institutions<\/a>\nlooking to find many other potential uses for this technology.<\/p>\n\n\n\n

\"Blockchain
[Source: Asia crypto today, blockchain and Chinese tech economy in the world, 2019]<\/figcaption><\/figure>\n\n\n\n

On\na more technical level, the blockchain\nnetwork does not rely on a central authority\u2014by definition, it is a\ndemocratized system. In addition, since it provides a shared and immutable\nledger, the information stored in the blockchain is accessible to anyone and everyone on the network.\nHence, the blockchain\nis, by its very nature, transparent and everyone that participates in it is\naccountable for their actions. If one happens to have been following digital investments,\nbanking or cryptocurrency\ndevelopment over the last ten years, be it specifically related to the Chinese blockchain market,\nthe mind-boggling development of the likes of Bitcoin<\/a> and Etherium<\/a> is\nsomething quite familiar. The main goal of blockchain is to allow digital information to be\nrecorded and distributed but not edited. In a country like China, which,\ndespite its astounding economic growth is still in its developmental phase, the\nprinciple behind blockchain technologies\ncould be useful to accelerate its transition to the status of a developed\nnation by improving a wide range of practices in many fields.<\/p>\n\n\n\n

What Is the state of the blockchain\ntechnology in China?<\/h2>\n\n\n\n

As\nof November 2018, China led the world in new blockchain projects, with 263 in\nprogress. According to the data service provider based in Beijing Blockdata, the\nfigure accounted for about 25\npercent<\/a> of such projects globally. In addition, In 2018<\/a>\nglobal blockchain\nsurvey conducted at the international level, nearly 50 percent of the surveyees\nin China said that blockchain technology\nwas already being used within their organization, compared with only 14 percent\nin the United States. <\/p>\n\n\n\n

The businesses capitalizing on China\u2019s digital economy<\/h2>\n\n\n\n

On the entrepreneurial side, the company Qulian Technology Co., in Hangzhou, is an example of how companies capitalize on the expanding Chinese digital economy. In 2016, the company launched, the project Hyperchain<\/a>, which focuses primarily on enterprise-level network solutions for government agencies, companies and industry alliances.<\/p>\n\n\n\n

However,\nQulian is just one of the 615 companies and start-ups that have chosen China as\nthe place where to develop blockchain-related\ntechnologies. If the number of burgeoning companies were not impressive enough,\naccording to a report published in December 2018 by the Beijing-based think\ntank EO Intelligence revealed that 82 percent of these companies were founded\nbetween 2016 and 2018, at the same time half of the companies are working on\nthe adoption of blockchain\ntechnology in the financial industry. In June 2018, the company said it\nhad raised a total of 1.5 billion yuan ($222 million) in investments\u2014by far the\nlargest amount in the Chinese\nblockchain market at the time.<\/p>\n\n\n\n

\"Chinese
[Source: IPR Daily, Chinese blockchain market and policy regulations]<\/figcaption><\/figure><\/div>\n\n\n\n

Local governments investing in blockchain and cryptocurrency in China<\/h2>\n\n\n\n

In\nJune 2018<\/a>,\nthe city of Nanjing has launched a 10 billion yuan blockchain (equivalent to almost 1.5 billion\nUSD) investment fund to foster the development of cryptocurrency and public blockchain technology in China. Moreover, the\ncapital of Jiangsu province launched, in partnership with the Zhongguancun Blockchain Industry Alliance,\nthe Beijing-based alliance, which comprises blockchain companies and government research\ninstitutes. To add relevance to this initiative, the official announcement of\nthe $1.48 billion funds was made at the inaugural Industrial Public Chain\nSummit (IPCS), which was attended, among others, by the high-level local\ngovernment official Luo Qun, deputy secretary of the Communist Party of China\nin Nanjing.<\/p>\n\n\n\n

The central government warming up to blockchain and cryptocurrency in China<\/h2>\n\n\n\n

Initially,\nthe central government showed diffidence of the rapid development of the blockchain technology in China\nand the expansion of the Chinese\nblockchain market. So much so, that in 2018<\/a>\nthe government started clamping down on unregulated cryptocurrency trading. However, since the\nbeginning of this year, the government has softened its stance. For instance, President\nXi Jinping announced, during the annual conference<\/a> at\nthe Chinese Academy of Sciences, that the central government sees blockchain technology as\nhelping to accelerate breakthroughs made in many fields of technology. Needless\nto say that these words have been widely understood as an informal endorsement,\nvery much in line with the government\u2019s history of cautious and gradual\nendorsements.<\/p>\n\n\n\n

Xi\u2019s endorsement<\/h3>\n\n\n\n

\u201c\u2026Since the beginning of the 21st century, the global scientific and technological innovation has entered a time of unprecedented vibrant activity. A new period of scientific and technological revolution and industrial transformation is reshaping the global innovation map as well as the global economic structure. A new generation of information technology embodied by artificial intelligence<\/a>, quantum information, mobile communication, Internet of Things, and blockchain is accelerating the breakthroughs towards new applications. New fields of life sciences like synthetic biology, gene editing, brain science, and regenerative medicine will bring great changes. Advanced manufacturing technologies that integrate robots, digitization, and new materials are accelerating the transition of manufacturing into an intelligent, service-oriented, and green sector. The accelerated development of energy technologies, with the goal of clean, efficient, and sustainable development, will lead to a global energy transformation. Technologies encompassing the domains of Space and ocean are expanding the frontiers of human existence to new realms of development…\u201d <\/p>\n\n\n\n

(Translation provided by the author of this article. The original version can be found here<\/a>) <\/p>\n\n\n\n

Institutions\u2019 reception of blockchain in China<\/h3>\n\n\n\n

After\nlistening to the words of the Chinese general secretary, people may be tempted\nto wonder whether we are on the verge of a history-altering disruptive technology\nthat will have a massive social impact, not only on the Chinese digital economy but also on the\nworld economy at large. Or, is blockchain\nthe latest in a long list of tech buzzwords?<\/p>\n\n\n\n

The\nfact that so many government officials are taking pretty clear positions on the\nmatter seems to suggest that blockchain\ntechnologies should be taken seriously. In fact, while officials welcomed\na World Economic Forum whitepaper titled \u201cRealizing\nthe Potential of Blockchain<\/a>\u201d,\nwhich was published at the Annual Meeting of the New Champions in Dalian in\nJune 2017,  in September of the same\nyear, the People\u2019s Bank of China (PBoC<\/a>)\nannounced that it would ban with immediate effect at the national\nlevel the phenomenon of initial coin offerings (ICOs<\/a>)\u2014a\nprocess very similar to IPOs<\/a>,\nthrough which crypto start-ups raise funds to kickstart a project\u2014and take on\nto shut down all domestic cryptocurrency\nexchanges.<\/p>\n\n\n\n

\"Chinese
[Source: Bitsonline, view of the Hangzhou Blockchain Industrial Park]<\/figcaption><\/figure><\/div>\n\n\n\n

At the same time, the Director of the Institute of Finance at PBoC, Sun Guofeng clarified<\/a> that the ban \u201cshould not prevent relevant financial technology companies, industry bodies and other technology firms from continuing their research into blockchain technology\u201d. As a matter of fact, a mere two weeks later, the Ministry of Industry and Information Technology launched<\/a> the Trusted Blockchain Open Lab<\/a>. According to the ministry, The lab is meant to promote the exploration of blockchain technology and its applications in the Chinese digital economy<\/a> without becoming involved in the issuance of cryptocurrencies, or the exchanges related to the blockchain trade. In general, it could be argued that such pro-blockchain and anti-cryptocurrency policies are a sign that policymakers are on the one side cognizant that the public still lacks a good understanding of this technology, on the other side are carefully weighing in all the potential applications of the Blockchain technology in China. In fact, \u00a0the crackdown on highly speculative start-ups, which have populated the Chinese blockchain market since the very beginning, has not undermined the ability of the policymakers to encourage higher calibre and better-resourced players from unlocking the true potential of the technology. For example, Alibaba is one such player. In April 2017<\/a>, the company decided to open\u2014at its HQ in Hangzhou\u2014the very first blockchain industrial zone, which was nicknamed\u00a0 \u201cBlockchain Valley\u201d.<\/p>\n\n\n\n

Associations and university groups hosting blockchain events<\/h3>\n\n\n\n

Along\nwith private and public entities, further actors that are playing an active\nrole in the development of the blockchain technology in China are the university student groups.\nSome of the most active groups are based in Tsinghua university. These groups\nrun WeChat groups, blogs, associations like the Tsinghua Blockchain\nAssociation<\/a> as well as organise events centered on Blockchain technology in China,\nthe Chinese tech economy\nand more. In addition to these groups, the prestigious Schwarzmann College,\nwhich manages the Global Solutions\nFestival<\/a>, hosts regular seminars on the latest development in\nareas like AI\ntechnology<\/a>, the Chinese digital economy, and China\u2019s blockchain market.<\/p>\n\n\n\n

\"Chinese
[Source: Aite Group, blockchain growing share of the Chinese tech economy]<\/figcaption><\/figure><\/div>\n\n\n\n
CONTACT US NOW TO ANSWER YOUR QUESTIONS ABOUT BUSINESS IN CHINA<\/a> <\/a><\/div>\n\n\n\n

Why is blockchain technology receiving so much attention in China?<\/h2>\n\n\n\n

What makes blockchain technology particularly enticing for such a diverse group of private and public actors is the extremely flexible nature of the idea behind the blockchain technology. Specifically, a blockchain is made up of \u201cBlocks\u201d, which are connected to one another to form the blockchain. In fact, an effective use of blockchain technology in China could help the country overcome some serious structural challenges that lie on its path to modernisation and deliver key services for growth, like a greater capillarization of the financial institutions, which would allow the Chinese digital economy to reach a greater number of people; improvements in investment transparency, which would allow the Chinese tech economy<\/a> to secure more funding; and even improve governance, thanks improved communication between grassroots and authorities. <\/p>\n\n\n\n

The mechanics of the blockchain\ntechnology<\/h2>\n\n\n\n

The building blocks of the blockchain\ntechnology<\/h3>\n\n\n\n

As\nit is extensively explained on Investopedia<\/a>,\nThe blocks are nothing more than digital pieces of information. And the\nhandling of this information is divided into three parts:<\/p>\n\n\n\n