28/08/2018 How China’s local governments and academia propel blockchain business

TechTank

How China’s local governments and academia propel

blockchain business
Kevin C. Desouza, Chen Ye, and Xiaofeng Wang Wednesday, August 1, 2018

中文

Editor's Note:

This is the second of two posts about blockchain development in China. You can read the first post about
startup businesses and the response from the national government here.

T
he absence of a national standard of regulation allows local governments in
China to step into the blockchain business. Major cities in China are now
competing for supremacy by creating an ecosystem of blockchain. According to
statistics by Jingdata, Beijing and Shanghai host the highest shares of Chinese
blockchain companies, with 36 percent and 20 percent respectively, followed by
Shenzhen and Hangzhou. Several other major cities across China have started their
blockchain-related investments funds: in July 2018, Nanjing announced an ambitious
$1.5 billion investment fund to promote blockchain projects and encourage startup
companies to move to the city.

Beijing and Shanghai

According to the research by Block-45, a Chinese blockchain media outlet, projects in
Beijing mainly concentrate on cryptocurrency exchanges and mining machine
manufacturing, both lucrative businesses in the blockchain industry. The most highly
paid job offered by Beijing-based blockchain companies is around RMB 100,000 (USD
$14,690) monthly. By contrast, startups in Shanghai focus more on the application of
blockchain technology than on cryptocurrencies. More than 30 percent of those
startups are in the nancial services industry. They adopt technology like digital
identities and smart contracts to facilitate nancial services. Yet, neither Beijing nor
Shanghai has issued any clear regulatory policy, except few mentions in government
documents.

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Hangzhou
The government of Hangzhou has played a pioneering role in promoting blockchain
technology by addressing its importance in a 2018 government report. Zhejiang Daily,
the of cial newspaper of Zhejiang province, reports that Hangzhou is determined to
become the No.1 city globally for blockchain-backed business. The home of Alibaba,
Hangzhou established China’s rst blockchain-centered Industry Park in April 2018.
The government of Yuhang District, a suburb of Hangzhou, and a local venture capital
rm jointly set up a fund valued at RMB 10 billion (USD $1.6 billion) to nance
blockchain startups. So far, Industry Park has successfully contracted with ten
blockchain-related projects. One startup, Jixin Blockchain, is developing a more user-
friendly wallet application to help customers protect their digital currencies from theft
and loss. By doing so, they aim to make digital wallets more accessible to the public.

Shenzhen

Like Hangzhou, Shenzhen also wants to maintain a lead in developing blockchain

technologies. With strong electronic product manufacturing capabilities, Shenzhen has
become a center for manufacturing and sales of mining machinery, which attracts
buyers from all over the world. However, Shenzhen’s involvement in blockchain extends
far beyond supplying mining machines. In 2016, Shenzhen established China’s rst
Financial Blockchain Consortium, which aims to create coordination mechanisms for
nancial blockchain technology research and development. Recently, the Shenzhen
government launched a venture capital fund up to RMB 500 million ($79 million) to
identify promising projects and build a vibrant blockchain ecosystem in the city.
Shenzhen Institute of Innovation and Development is responsible for collecting over
100 blockchain-related projects to nance them for the venture capital fund.

Academia
China’s leading universities are devoting resources to develop blockchain-related
technologies and talents. Their efforts demonstrate the growing interest from China’s
academic institutions in the area of blockchain. In 2016, Tsinghua University, together

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with IBM and Walmart, announced that they are using blockchain technology to
improve the way food is tracked, transported, and sold to consumers across China. Now,
Tsinghua is one of the eight Chinese universities that offer blockchain-related classes.

Zhejiang University, located in Hangzhou, offers a blockchain and digital currency

course. This course teaches students the technology behind blockchain platforms like
HyperLedger, and offers case studies in blockchain application and cryptocurrencies.
The university has provided talent to the blockchain industry, graduating the founders
of startups such as Hyperchain and Yunphant. New data published in February by China
State Intellectual Property Of ce highlights the efforts by the university to patent
blockchain applications developed on campus, such as a cloud-based blockchain system
that facilitates cross-border payment transactions. Zhejiang Daily also attributes
Hangzhou’s success of developing blockchain technology to Zhejiang University.

Suzhou, a city of Jiangsu province, wants to copy Hangzhou’s success in terms of

developing blockchain technologies, so it set up special fund valued at RMB 1 billion
($157.7 million) to support the establishment of a “Blockchain Valley” through
collaboration with Tongji University. The Blockchain Valley will attract blockchain-
related enterprises and talent in order to apply this cutting-edge technology to every
aspect of public service.

A Bright Future
China has not only actively developed blockchain-based business domestically, but also
gradually increased its global engagement. China, together with the U.S., U.K., Canada,
Germany and 17 observing countries, is participating in International Technical
Committee for Blockchain Standards, called ISO’s TC 307 committee, in order to
produce a range of deliverables such as standards. To enhance global engagement, the
government-backed Investment Association of China announced plans in March to
create a blockchain investment development center for linking domestic and
international resources, attracting foreign investment, and leading international
blockchain forums.

In addition to participation in agenda setting, China tops other countries and leads
blockchain patent applications in 2017, according to data from the World Intellectual
Property Organization. China nearly quadrupled its number of such lings in 2016.
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Although a patent doesn’t necessarily lead to viable product or use case, it provides the
owner an advantage and sets barriers for latecomers.

China’s interest and investments in blockchain are signi cant. Due to the organic,
bottom-up, nature of these efforts, China has not yet leveraged synergies that come
from coordinated efforts and scale. In our estimate, those days are quickly approaching,
and China is poised to retain a leadership position in this space for some time.

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