Described as new social networks, Chinese metaverses face an uphill battle to replace traditional social platforms

Multinational tech giants like Meta and Microsoft have sunk millions of dollars into developing new technologies for metaverses, laying the groundwork for people to interact with each other in virtual environments with ever-higher frequency, moving more of our lives online.

The concept has caught on in China as well. Framed as the next phase of social networks, these metaverse apps have garnered large user bases, and retail investors have been buying the shares of public companies that claim to be building new games and applications in this format.

The overall direction of metaverses in China has not been defined by their developers, and regulations that apply to other sectors, like video games, are impacting how they are being designed.

Keeping it casual

Metaverses developed for users in China are often built differently from those overseas. Whereas applications like Decentraland and The Sandbox take a page from Roblox to encourage users to create wearables, structures, and other objects from scratch, Chinese metaverses typically only require users to sign on, select a wardrobe, and then interact with each other. Mini-games, such as small-scale role-playing games, may be built-in, but the core function is to connect people with each other in a game-like environment, shifting interactions from text-based chats to moving graphics.

One example is Oasis, a metaverse platform where users can socialize and visit virtual cinemas, karaoke bars, and amusement parks. The developer behind Oasis, Shanghai Wei’er Network Technology Co., closed its Series B round to land an eight-figure US dollar investment this month. According to data compiled by Sensor Tower, Oasis gained more than 6 million registered users in Q4 2021, and has become one of the fastest growing metaverse-related social apps in the world. It claims to have nearly 1 million daily active users.

The sense of novelty offered by Oasis for its users, who are primarily Gen Z, is also present in Jelly, another self-described social network metaverse app. At its peak, Jelly displaced WeChat to become the most popular free app in China’s Apple App Store, its popularity (before it was taken offline) stemming from cute designs and the provision of space where users can separate their private lives from public images.

Metaverse apps like Oasis and Jelly have managed to capture the attention of young users, but it remains unclear for now whether they will be able to evolve and adapt to prevent users from defecting to the next new virtual world.

This is where the differences between metaverses in China and the rest of the world matter the most. By placing an emphasis on the ownership of virtual goods, the likes of Decentraland and The Sandbox are able to retain their users, as there is financial incentive to remain in their worlds. These economic structures are often built using non-fungible tokens and cryptocurrencies, which cannot be utilized in this manner in China.

That leaves Chinese metaverses in a delicate position. If users aren’t financially motivated to remain in the metaverse worlds, and if these digital environments cannot develop additional video game elements due to playtime caps for underage users, then the use cases for Chinese metaverses will be limited.

Mixed signals from government officials

Since October 2021, when Facebook rebranded as Meta, some Chinese officials have publicly endorsed the development of metaverses. This direction has made its way into the industry development policies of the local governments of Shanghai, Beijing, Shenzhen, and more cities. The sentiment may reflect a desire to be the home bases of the next great tech companies, where innovative small and medium-sized enterprises build out to become powerhouses. In particular, officials of Shanghai are actively courting this type of company.

However, on the national level, metaverse developers haven’t yet received a nod. In January, the State Council released its 14th Five-Year Plan, which charted the direction of building a robust digital economy in China. The document states that the nation will “accelerate the building of a digital China” between 2021 and 2025, with the goal to develop the country’s digital economy and become a cyber superpower. However, there was no explicit mention of metaverses and the broader implications of their development.

Aside from Oasis and Jelly, major tech firms like ByteDance and Baidu have also created their own metaverse apps. All of these platforms, whether they are built to be social networks, environments for mini-games, or meeting places for work-related use, will likely face additional regulatory hurdles. In particular, video games, which are viewed as an entry point for metaverses, are strictly regulated in China, hindering the overall development of the country’s homegrown virtual environments.