Just as Facebook’s leadership can’t stop speaking about the metaverse, the term is now also a buzzword in China. Metaverses are immersive and interactive online environments that are described as the next iteration of the internet, where personal interactions, commerce, entertainment, and other activities can take place.
China’s metaverse craze is expected to redefine the video game and media industries, as multiple listed companies have said they will be developing hardware and software related to the immersive worlds. The announcements have sent their stock prices to new heights in the past few weeks.
Metaverse concept stocks have surged by more than 30% on average in the past month, according to an index compiled by Chinese stock information portal East Money.
It started with one company in September. The stock price of Zhongqingbao, a Shenzhen-listed game developer, received a boost after the company released a teaser of its planned metaverse game Brew Master that month. Although details about the game weren’t unveiled, the company’s stock price has risen more than 380% since the announcement in September.
Since September, hundreds of millions of yuan have been devoted to buy orders for companies that claim they will be architects of new ways for people to interact online. The rush of capital into companies like Zhongqingbao has alarmed regulators, who believe announcements that include the term “metaverse” may amount to market manipulation.
Last Thursday, the Shenzhen Stock Exchange issued an inquiry letter to Zhongqingbao, demanding clarifications on the specifics of its R&D spending related to Brew Master. The bourse’s representatives aim to determine whether Zhongqingbao’s expenditures are in line with building a metaverse game.
The stock exchange also required Zhongqingbao to acknowledge whether the company posted false or misleading information about its roadmap in posts published on its social media feeds.
This is the second letter that Zhongqingbao has received from market regulators. In late October, the company was questioned by the Shenzhen Stock Exchange about its ventures related to the metaverse.
So far, the stock prices of eight companies listed in Shenzhen and Shanghai have climbed immensely. All of them have been questioned by authorities about their intentions to develop new business directions related to metaverses. Regulators are particularly concerned about the possibility of manipulative behavior or securities fraud.
One company, Jiachuang Shixun Technology, is a digital television software developer in Shenzhen. Around 5% of its revenues are drawn from VR products, but its stock price has doubled since November 1.
Experts have expressed concern about the metaverse concept being mischaracterized to public investors. Xu Yingbo, chief technology industry analyst of CITIC Securities, said that the development of metaverses depends on the advancement of AI, graphics engines, high-speed wireless communication, and many other technologies.
Besides those developments, there are fundamental aspects that need to be addressed before a full-fledged metaverse can be maintained. These include fast and stable internet infrastructure that can support heavier internet traffic. Perhaps among the greatest concerns for Chinese regulators is that rules for data protection and privacy are yet to be established for these immersive, virtual worlds.
Furthermore, the intense demand for energy may represent a significant challenge in the quest to build a working metaverse, Xu said in a research note.
Yuefeng Wu, a senior media analyst and fund manager for Fengjing Capital, said on Weibo that the metaverse will not be ready for general consumers until 2025 at the earliest.
One regulatory concern is that it is unclear how the government will classify metaverses. If they are deemed to be sufficiently similar to video games, then they may be governed by strict rules that were enacted this year, including a three-hour weekly cap for minors.
That has not discouraged major tech firms from exploring this line of development. Tencent, Baidu, and ByteDance have all invested more in their R&D for virtual reality and augmented reality hardware. Some companies let consumers mint NFTs. Baidu’s new metaverse environment, Xirang, or the “Land of Hope,” is now online. While few features have been built for Xirang, visitors are already exploring three scenarios where art and the company’s products are showcased.
Last month, a state-backed research institute affiliated with the Ministry of State Security published a note to warn that the metaverse could pose political and social threats to national security. The note’s authors called for tighter regulations and guidance from the government. This did not dent the rising stock prices of listed companies with stated metaverse ambitions.
Metaverses will reshape how we experience video games, interpersonal communication, entertainment, and even professional interactions. But even the most advanced metaverses are in their nascent stages. “It is too early to give advice on metaverse investment at this point,” Xu wrote. “But we are optimistic about the opportunities in the metaverse in the long term.”