On Thursday, October 24, Xi Jinping, president of the People’s Republic of China, exhorted the country to “seize the opportunity” offered by blockchain technologies. In particular, he called to “clarify the main direction, increase investment, focus on a number of key core technologies, and accelerate the development of blockchain technology and industrial innovation.”
I have been following China’s blockchain industry for a while now, and I am regularly speaking with major players in the space. Here’s what I think will happen in China in the next 1–2 years:
- Enterprise blockchain adoption will accelerate significantly. Moving from pilots and proofs of concept to deployments at scale is the biggest barrier for China’s enterprise blockchain projects. Without clear economic value and ROI, enterprises tend to refrain from adopting blockchain-based solutions. Now, blockchain technologies benefit from a clear endorsement from the top leadership in China. As a result, I expect that government institutions and state-owned enterprises will boost investments in blockchain technologies and will play bigger roles in blockchain consortiums in China. Case in point, China’s State Grid Corporation set up a blockchain subsidiary in August this year to develop electricity internet-of-things applications. This, in turn, might create a new round of blockchain speculations on the stock markets, as China’s capital markets tend to be heavily influenced by regulations.
- The digital yuan will be officially launched in 2020 or before. Facebook’s plans to launch Libra worked as a catalyst for People’s Bank of China (PBoC), the Chinese central bank, to accelerate its national digital currency plans. PBoC will likely play the sole and central role in China’s digital currency. Given recent announcements, including a new law regulating cryptography announced over the weekend and the accelerating recruiting activities of PBoC, I expect that China’s national digital currency will be launched in 2020, if not before.
- Banking will be at the forefront of blockchain innovations. In his speech, President Xi has highlighted a few use cases for blockchain such as small- to medium enterprise (SME) lending, banking risk management, and compliance. The instructions from China’s top leadership will push the digital transformation process of megabanks’ back-office operations and improve their operational efficiency. Banks can leverage blockchain-based solutions to reduce the costs for serving SME customers and make financial inclusion possible and profitable. In fact, China’s leading digital-only bank WeBank has already adopted blockchain-based solutions to advance the reconciliation process efficiency in its syndicate loans.
- Shenzhen will play a key role in advancing blockchain innovations in China. China’s central government released a document on August 18 that aims to build Shenzhen into a “hub of innovation, entrepreneurship, and creativity with international influence.” Besides the central government support, Shenzhen benefits from a great location, just 17 kilometers from Hong Kong. It also fosters plenty of leading tech and fintech giants such as Ping An Group, China Merchants Bank, WeBank, Tencent, and Huawei. These digital innovators have already invested heavily in blockchain space and commercialized a number of use cases such as China Merchants Bank’s blockchain-based automated reconciliation messaging system and Ping An OneConnect’s blockchain-based international trade finance platform. These digital giants will incubate more blockchain projects.
President Xi’s recent instructions on blockchain also show that the Chinese government and relevant institutions are embracing new technology trends at a very rapid pace. After AI, China has great ambitions for blockchain technologies.