China’s technology giants are beginning to invest in the metaverse — the latest buzzword in internet technology. It’s a term with no concrete definition, but largely taken to mean virtual worlds that people will be playing and living in.

Censorship will likely be rife and regulation tight as Beijing continues to keep a close check on the practices of its domestic technology firms.

U.S. firms like Facebook parent Meta are going all-in on the metaverse concept, while Microsoft has positioned its proposed acquisition of gaming company Activision as a play on this theme.

Chinese firms are taking a more cautious approach. So what are they up to and how will regulation play out?

What are the apps?
In China, the total addressable market for the metaverse could be 52 trillion yuan, or around $8 trillion, Morgan Stanley said in a note published last month.

Companies like Tencent, NetEase, TikTok owner ByteDance and Alibaba could be the front-runners in this space among China’s internet companies.

Metaverse is the future of social network. All China’s tech giants have to embrace it to find new ways to engage the youngest generation of internet users…
Winston Ma
That comes down to the type of applications that could be part of the metaverse. Analysts say that virtual reality, gaming and social media could be some of the early applications.

This may include things like buying virtual items in games or creating digital avatars of yourself to participate in meetings.

“Metaverse is the future of social network. All China’s tech giants have to embrace it to find new ways to engage the youngest generation of internet users, which is critical at the time when their business models on smartphones and mobile internet are matured,” Winston Ma, managing partner at CloudTree Ventures, told CNBC.

China’s tech giants in the metaverse
In an earnings call in November, Tencent CEO Pony Ma said the metaverse will be an opportunity to add growth to existing industries such as gaming. Tencent is the world’s largest gaming company with a strong portfolio of PC and mobile games.

Tencent also owns WeChat, a messaging service with over a billion users that has social media aspects.

Ma said the company has “a lot of the technology and know-how building blocks” to explore and develop the metaverse.

Meanwhile, ByteDance has made an aggressive expansion into gaming over the last year. In August, the company acquired virtual reality headset maker Pico. ByteDance also owns TikTok, the short-form video app, and its Chinese equivalent Douyin. The Beijing-headquartered firm has laid foundations in VR, social media and gaming.Alibaba this year said it plans to launch augmented reality glasses for virtual meetings. Augmented reality refers to virtual images overlaid on the real world. Again, this could be a play on the metaverse. The e-commerce giant launched a “virtual influencer” named Dong Dong for the Winter Olympics in Beijing. The digital avatar can be found on Alibaba’s Taobao shopping app and provides facts about the Olympics and also promotes items related to the Games.

NetEase, another one of China’s gaming giants, has set up a base in the southern province of Hainan focused on the development of metaverse applications, local media reported last year.

Search giant Baidu launched a metaverse app last year called XiRang, a sort of virtual world that can hold up to 100,000 people at once. Baidu executives, however, downplayed expectations of the app at its launch and said many aspects were not yet up to par. Ma Jie, a vice president at Baidu, said it could be another six years until a full launch.