China pursues a pragmatic approach to blockchain technology.
As a tamper-proof way of recording every digital transaction, blockchain technology could soon play a key role in everything from commercial finance and the Internet of Things, to artificial intelligence (AI) and 5G networks. As the Chinese government is well aware, it has the potential to be both hugely disruptive and immensely valuable.
For this reason, China is now working hard to dominate the blockchain space and has been for some time. The country currently accounts for a quarter of all new global blockchain projects, while some of the biggest companies in the blockchain and cryptocurrency community are Chinese.
As companies around the globe explore new uses for blockchain, China is quickly outpacing the rest of the world in patent applications for blockchain-related technology. According to Tokyo-based research firm Astamuse, China filed around three times as many such patents (7,600) as the U.S. between 2009 and 2018, while data compiled by Japanese legal services firm NGB reveals that Chinese e-commerce giant Alibaba, which uses blockchain technology to power its Alipay e-payment platform, has filed more than 500 patent applications over the same timeframe.
Chinese firms are backing up their patent applications with financial investment. China’s enterprise blockchain spending is expected to reach $2 billion by 2023 (up from $304 million in 2019), out of a global total of $15.9 billion, according to market research firm International Data Corporation. The firm sees trade finance and post-trade transactions as two areas where the application of blockchain technology could potentially be most disruptive in China, ahead of international payments and settlement.
“So far, China’s focus on blockchain has primarily been as a practical financial instrument,” says Juncheng Zhang, who has worked for blockchain startups in both the U.S. and China and is currently writing a book on cyptocurrency competition. “A blockchain-based international financial system involving the yuan (RMB) has the potential for widespread international adoption.”