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Blockchain

Source: “Blockchain in China”, Communications of the ACM, 2019

Although virtual currencies are banned from being issued and traded in China, blockchain technology is growing fast in the country. Chinese companies are trying to build the world’s most advanced blockchain platform as the blockchain technology enables other related technologies such as automated contracts and value chain tracking. [1] The Chinese government is funding $1 billion in the blockchain sector in 2022. China’s cyberspace regulator along with other regulators issued a notice in which it called on provincial-level regulators to “give full play to the role of blockchain” in areas such as data sharing, optimizing business processes and reduce operating costs. This means that all the pilot units should “give priority to adopting blockchain software and hardware technologies”. [2]

Blockchain, as one of the seven key industries of digital economy in the 14th Five-Year Plan (2020-2025), will promote the core industry of the digital economy to reach 10% of GDP by 2025. [3] In recent years, the market size of blockchain has been growing, from 85 million yuan (around $12.6 million) in 2017 to 561 million yuan (around $83.1 million) in 2020, with a compound annual growth rate of 87.58%, and is expected to grow to 1.409 billion yuan (around $0.21 billion) in 2022. By the end of 2021, there were about 93,600 blockchain-related registered enterprises in China, of which 26,304 were newly registered in 2021, with an increase rate of 6.55% year-on-year. The number of investments in China’s blockchain industry in 2021 was 39, down 11.36% year-on-year. Yet, the investment amount was 3.931 billion yuan (around $0.58 billion), up 60.65% year-on-year. [4]

According to the World Intellectual Property Organization’s database, China is home to more than half of the 406 Blockchain-related patent applications. [5] China is the world’s largest applicant for blockchain patents. In China, digitally savvy opportunists are driving the blockchain revolution. China’s local governments are eager to collaborate on Blockchain-related activities and make investments that would assist start-ups. Top Chinese merchants are considering using blockchain-based traceability solutions. JD.com, a Chinese e-commerce company, intends to leverage Blockchain technology to control its supply chain. The use of blockchain in supply chain management is predicted to rise at a double-digit CAGR in the next few years. China is open to implementing blockchain technology in a variety of areas, including mobile payments and trip bookings. Mobile payments account for 90 percent to 100 percent of transactions, and 65 percent of Chinese visitors are prepared to pay with their phones when traveling abroad.

At present, China’s blockchain industry is in the introduction period, and the industry presents two main characteristics. [6] First, large industry enterprises actively apply blockchain technology to improve their own business, but they are still trying, and the main application scenarios are a non-core business in the industry. For example, Ping An of China, China UnionPay, and Ant Financial Services are limited to non-core business in blockchain application exploration; secondly, the business development of enterprises mainly providing blockchain technology services is mostly in the initial stage, and the product technology system and business model are not mature enough. The demand side’s awareness of blockchain still needs to be improved. Blockchain has formed some application cases in scenarios such as judicial deposition, government management, livelihood services, food traceability, supply chain management, etc., but further optimization and improvement are still needed. China’s blockchain market is expected to maintain a high speed of growth, with a compound annual growth rate of 73% from 2021 to 2026. The market size will reach $16.368 billion in 2026, and the market size of China’s blockchain industry is expected to reach the trillion level in the next 20 years.