CHINA'S DIPLOMATIC TOUR OF EUROPE

This is an article I wrote in China Pictorial

On his first visit to Europe in five years, Chinese President Xi Jinping has been intent on forging new relationships.

The three countries he chose to visit — France, Serbia and Hungary — are eager to strengthen economic ties within China.

In the past six months, President of France Emmanuel Macron has visited both India and Brazil in an attempt to place his country at a fulcrum between the BRICS group of developing countries. At a time of growing distance between the "Global South" and Western powers, France is a bridge for China.

China was the biggest investor of Serbia last year, as well as its second-largest trading partner, and Hungarian Prime Minister Viktor Orbán has backed the inflow of huge Chinese investment.

China- France Trade

Beyond these comrades, Europe has differences with Beijing, whose economy was the same size as the EU's when Xi visited in 2019. China now boasts of an economy that is 15% bigger. At the same time, Xi's visit could help to mitigate Europe's tendency of "de-risking" from China.

Xi's visit to France marked the 60th anniversary of the establishment of diplomatic relations between the two. In January, the Franco-Chinese year of cultural tourism was launched, bolstering cultural co-operation.

France's early recognition of the potential of China’s expanding market as a trading partner made France the first major Western country to establish diplomatic relations with China.  Cementing this camaraderie, China and France signed a number of agreements in areas such as nuclear energy and agriculture. 

France's Airbus is in talks with China over a major aircraft order. China's "Big Three" state airlines have pledged to buy 292 Airbus jets. 

China exported $2.81B and imported $2.24B from France in February 2024, resulting in a positive trade balance of $573M. The exports of China have increased by $143M (5.37%) from $2.67B to $2.81B, between February 2023 and February 2024, while imports decreased by $-1.01B (-31.1%) from $3.25B to $2.24B.

The increase was in semiconductor devices ($36.1M or 58.1%), electrical transformers ($33M or 82.5%), and gas turbines ($17.4M or 51.9%). The decrease in imports was in wheat ($-106M or -61.7%), packaged Medicaments ($-81M or -41%), and beauty products ($-76M or -22.8%).

Xi with Macron

On the diplomatic front, Macron had pulled out a bold surprise in his China trip last year, by calling for "strategic autonomy" on the Taiwan question, triggering a heated discussion within Europe. Prior to Xi’s visit this time, Macron appealed for more integrated European defenses and said the continent must not become a vassal of the U.S., as he outlined his vision for an independent Europe in a speech at Sorbonne.

The Broader Perspective

Xi’s visit to Serbia, first in eight years, is significant within the cooperation framework of China and Central and Eastern European countries and the BRI. The visit to Hungary coincided with the 75th anniversary of China-Hungary diplomatic relations.

Serbian President Vucic and Hungarian Prime Minister Orban attended the third Belt and Road International Forum for Cooperation in Beijing last October. 

BRI helped breathe new life into a century-old Smederevo steel plant in Serbia, which was suffering from an uncertain future. In April 2016, Chinese firm, HeSteel group bought the plant for $ 51.9 million, introduced more than 20 new technologies and management systems and reused waste materials to produce better quality steel. The plant became Serbia's largest exporter in 2018. In 2023, it received the Green Agenda award jointly conferred by the European Union and the UN Development Program.

Hungary is one of China's most important trading partners in Central and Eastern Europe. Bilateral trade reached $15.52 billion in 2022, an increase of 84 percent from 2013.

Since the start of this year, a broader series of high-level engagements between China and the EU have been in the making.

In January, Belgian Prime Minister Alexander De Croo embarked on his first trip to China and signed a number of cooperation documents on the economy, trade, agriculture and food. In late March, Prime Minister of the Netherlands Mark Rutte traveled to China, with a willingness to deepen partnership in economy and trade. In April, German Chancellor Olaf Scholz reached China, accompanied by three federal ministers and a business delegation. Italian Prime Minister Giorgia Meloni is planning to visit China later this year.

Hypocrisy Exposed

Szijjarto, the Hungarian foreign minister, sees the actions taken by some European countries against China as "hypocritical." 

He is right. The de-risking narrative proposed by the European Commission in its policy framework toward China echoes Washington's "decoupling from China" rhetoric. 

Last year, the EU launched an anti-subsidy investigation into electric-vehicle imports from China. Recently, the European Commission launched a probe into Chinese public procurement of medical devices, following an unprecedented probe in February into a Chinese trainmaker for allegedly using subsidies to undercut European suppliers.

The EU accounts for nearly 40 percent of China's electric vehicle exports. Wang Wentao, Minister of Commerce of China, said during his trip to France in early April that the accusations by the U.S. and Europe regarding Chinese EVs are baseless.

There is competition between China and Europe, in EVs. But, Europe should view China as an opportunity rather than a challenge, at a time when the European Investment Bank has cautioned that the Ukraine crisis has disrupted trade and aggravated inflation for basic goods like energy, food and metals in Europe.

Europe is still mired in the Russia-Ukraine conflict, a "trap of its own making." It has made Europe realize its high dependence on the U.S., and it has jeopardized Europe's China policy. If Europe continues to follow the U.S. view and takes a confrontational approach toward China, it would remain a U.S. vassal.

In this backdrop, the European tour of Xi will be closely monitored in Washington. Greek economist and politician Yanis Varoufakis has pointed out that the visit will offer Europe the opportunity to demonstrate that they have retained some capacity to look after their countries' interests rather than following Washington's orders. Hence, this is the right time for Europe to stand up.

Article in China Pictorial: http://china-pictorial.com.cn/chinas-diplomatic-tour-of-europe

INDIA OPPOSES CHINA'S BRI AT SCO SUMMIT

India also opposes the strategy for 2030

The recent 23rd Shanghai Cooperation Organisation (SCO) summit, virtually hosted by India, discussed some key issues including regional security, economic connectivity and trade. It also saw the inclusion of Iran as a new member and opened the chapter for Belarus’ membership. While Belarus and Mongolia were invited as observer states, Turkmenistan was invited as the guest of the chair.

The summit was joined by Indian Prime Minister Narendra Modi, Chinese President Xi Jinping, Russian President Vladimir Putin, Pakistan Prime Minister Shehbaz Sharif, and leaders from four central Asian countries.

The theme of India’s SCO presidency is “SECURE,” which stands for security, economic development, connectivity, unity, respect for sovereignty and territorial integrity, and environmental protection.

New Delhi declaration

The summit issued a joint communique New Delhi Declaration, along with two separate joint statements, one on “cooperation in countering radicalisation leading to separatism, extremism, terrorism,” and the other on “digital transformation.” The Heads of State Council approved the SCO Economic Development Strategy for 2030.

Leaders decided to forge closer ties within the expanding Eurasian bloc but stressed the group is not directed against any other states.

The joint declaration said SCO members oppose bloc, ideological and confrontational approaches to address problems and security challenges. Without referring to NATO’s expansion and Western military assistance to Ukraine, the leaders were critical of the negative impact of “unilateral and unlimited expansion of global missile defence systems by certain countries or groups of countries.”

It called for an inclusive government in Afghanistan with the participation of representatives of all ethnic, religious and political groups in Afghan society.

The SCO Heads of State Council approved the Concept of Cooperation between the member states to decarbonise transport and promote digital transformation and innovative technologies to achieve greater efficiency and sustainability.

It also adopted decisions on the Regulation of the Executive Committee of the SCO Regional Anti-Terrorist Structure and the signing of a Memorandum between the SCO Secretariat and the United Nations Environment Programme.

With the inclusion of Iran, PM Modi proposed an increase in the use of Chabahar Port, located in southeastern Iran, on the Gulf of Oman, for trade and other economic activities. India feels that the International North-South Transport Corridor can serve as a secure and efficient route for landlocked countries in Central Asia to access the Indian Ocean.

Modi said that India would be delighted to share India's AI-based language platform Bhashini with everyone to remove language barriers within SCO.

Referring to Pakistan, Modi said, "Some countries use cross-border terrorism as an instrument of their policies and provide shelter to terrorists. SCO should not hesitate to criticize such nations. There should be no place for double standards on such serious matters."

In an attempt to corner India, Pakistan PM Shehbaz Sharif said, "There can be no justification for the killing of innocent people, regardless of the cause or pretext. Similarly, religious minorities should never be demonized in the pursuit of domestic political agendas."

Sharif's statement comes at a time when there are reports of Pakistan persecuting minorities.

In May, Pakistan Foreign Minister Bilawal Bhutto Zardari visited India to attend a key multilateral meeting of the SCO in Goa, and he was the first Pakistan foreign minister to visit India since 2011.

President Xi warned against attempts to foment a new 'Cold War’. He highlighted the significance of upholding multilateralism. He called upon the leaders of Russia, Iran, and other member states to resist sanctions.

My article 

In his first international meeting since the Wagner mutiny, Russian President Vladimir Putin asserted that sanctions imposed by US-led Western countries are making Russia stronger. He told the summit that Russia would stand up against Western pressure, sanctions and "provocations". Russia views countries such as China, India and Iran as key partners in confronting the United States and resisting what it portrays as U.S. attempts to dictate the world order.

Spat over BRI

India, which holds the presidency of SCO and the G20 this year, is walking a diplomatic tightrope as relations between the West and a Russia-China partnership have been fraught due to the Ukraine war, and Beijing's growing clout in global geopolitics.

At the summit, all members except India supported China's Belt and Road Initiative (BRI) which rebuilt the old Silk Road to connect China with Asia, Europe and beyond. Also, India did not sign the SCO Development Strategy for 2030, because the document "had too many Chinese catchphrases."

The New Delhi Declaration included a paragraph reaffirming support for China's Belt and Road Initiative (BRI), which India refused to sign. Earlier too, India had declined to sign the paragraph during the Samarkand declaration in 2022.

India also raised the connectivity issue. "Strong connectivity is crucial for the progress of any region. Better connectivity not only enhances mutual trade but also fosters mutual trust. However, in these efforts, it is essential to uphold the basic principles of the SCO charter, particularly respecting the sovereignty and regional integrity of the Member States," Modi said.

All SCO members, barring India and Russia, are part of BRI, which India objects to, since a major part of its project in Pakistan runs through the Pakistan-Occupied Kashmir (PoK), called the China-Pakistan Economic Corridor (CPEC).

On Modi referring to the BRI, Foreign Secretary Vinay Kwatra said, "The references to sovereignty and territorial integrity came both in the context of the SCO charter and also in the context of the connectivity projects.”

However, Xi Jinping defended BRI and said, "China will hold the third 'Belt and Road' International Cooperation Summit Forum. All parties are welcome to participate in the activities of the forum and jointly pave the road to happiness that benefits the world."

Commenting on CPEC, Sharif said, "The China-Pakistan Economic Corridor, a flagship project of the BRI, can be a force multiplier not only for regional connectivity but also for regional stability, peace and prosperity."

Against the West

China’s focus at the summit, however, was the West, as was that of Russia, and India’s protest over BRI is not a worrying factor.

Hence, Xi said, “We uphold international fairness and justice, oppose hegemonic and bullying practices, expand the "circle of friends" of the organization, and build a partnership of dialogue rather than confrontation and partnership rather than alliance, strengthening the progressive force for maintaining world peace and stability.”

Both Xi and Putin pushed for switching to a system under which foreign trade could be settled in local currencies, a move that helps get around the use of the U.S. dollar, especially in the aftermath of sanctions following the Ukraine war.

India has refused to blame Russia for the war and has lifted bilateral trade largely by purchases of Russian oil to a record high, irking the West.

In his briefing, the Indian Ministry of External Affairs spokesperson Arindam Bagchi said, "The Russian president spoke of rumble-yuan exchange. We have also been supporting trading in national currencies."

Both Xi and Putin are expected to visit New Delhi in September as India hosts the G20 summit, and U. S. President Joe Biden and leaders of other member nations are also likely to be present.

The SCO summit took place barely two weeks after Modi was hosted by President Biden during a state visit, and the two countries called themselves "among the closest partners in the world".

And, China has repeatedly cautioned India, not to fall into the American trap. India is well aware that China is driving the relationship between India and the U.S. It is the only reason why Washington feted Modi. Hence, India would never throw its full weight behind Biden, if the China-U. S. confrontation escalates into a stand-off. India is just seeking to leverage its warming ties with the U.S. to its advantage. For India, camaraderie with China is precious, as a neighbour and both are civilizational nations.

Edited article in China-India Dialogue : 

http://chinaindiadialogue.com/expanding-the-sco-fostering-cooperation-and-connectivity

CHINA CUTS ITS US TREASURY HOLDINGS

Instead, it invests in Gold

China has been cutting down its holdings of U S Treasury securities gradually. But where are the China funds going from the US?

China, the second largest non- U S holder of U S Treasuries after Japan, reduced its holdings to the lowest in February 2023. China's holdings fell to $848.8B in February from $859.4B in January. The figure stood at $1.03 trillion at the same time last year. It was the seventh straight month of decline.

In January, the holding stood at $7.4 Trillion; it was $7.7 Trillion in February 2022, according to US Treasury data released in April 2023.

China ratcheted up its US Treasury bond purchases starting in 2000. Its buying spree peaked in 2014, dropping below the magic US$1 trillion mark in April 2022.

China has already trimmed its holdings by 34.1% over the past 10 years, including a 16.6% cut in 2022.

The reasons

China has three reasons for the move:

• It needs to diversify its foreign reserves, amid “external risks.” The risk is the trade war between the two countries.

• Beijing is wary of the US dollar’s dominance, as it is facing financial sanctions from Washington. 

• US Treasury yields declined following the US Federal Reserve’s progressive interest rate increases last year. The hikes resulted in a fall in the price of US treasury bonds.

De-dollarizing moves

China is trying to internationalize its currency, the yuan. For instance, the proportion of yuan in Brazil’s international reserves has reached 5.7%, while the Euro is 4.7%. Yuan is now Brazil’s second-largest reserve currency.

Yuan found a place in Brazil’s foreign-exchange reserves four years ago, as its US dollar assets fell to 80.24% at the end of 2022 from 89.93% in 2018.

Russia, which has been kicked out of the US dollar system and SWIFT after the Ukraine invasion, has already increased its holdings of the yuan in foreign-exchange reserves and sovereign funds, with more than two-thirds of bilateral trade settled in yuan or rouble.

Hiding in tax havens

Along with the decline in US Treasuries, China’s Treasury holdings in the tax havens, the Cayman Islands jumped by $38.5B and Bermuda by $7B.

China may be hiding some dollar assets in there, to sidestep Western sanctions

Investing in gold

Beijing is replacing some of its US Treasury holdings with gold. China increased its gold reserves for the sixth consecutive month in April to 1893 tons, growing by about 102 tons, in the face of heightened political risks.

The largest single purchase of gold in February was by the People’s Bank of China, which added 25 tons. It added around 18 tons in March alone.

© Ramachandran 

LESSONS FOR CHINA AND INDIA FROM META CRISIS

Stale Vision Led to Crisis

The parent company of Facebook, Meta, cutting 11,000 jobs, or 13 per cent of its workforce, did not come as a surprise to the global techie world watchers, since it was waiting to happen. Though the tech giant has termed the retrenchment as an attempt to become “leaner and more efficient,” it is a well-known fact that American tech companies are in the throes of an unprecedented crisis. The “American dream” is falling into a dark abyss.

The Meta crisis is the beginning of a turbulent era in Silicon Valley, which so far stood as a gigantic bastion of economic power. The United States has always boasted that this bastion is recession-proof, but now the Fort has been breached; according to Crunchbase, 50,000 U.S. techies have been laid off this year alone. Elon Musk gave marching orders to half of Twitter’s workforce; Peloton, a maker of internet-connected exercise bikes, has more than halved its workforce, Robinhood, a popular stock-trading app, also has cut its labour force by 30 per cent, and fin-tech platform Stripe has announced layoffs. Google and Amazon have decided to lay off 10,000 employees, each.

The crisis of Meta

In the case of Meta, apart from inflation, rising interest rates, and recession, aggressive COVID-era expansion is partly to blame. Meta increased its workforce by nearly 60 percent during 2020- 2021. Facebook grew its staff by 28 per cent, to 87,314, in the 12 months ending in September.

My article in China-India Dialogue

"At the start of COVID, the world rapidly moved online, and the surge of e-commerce led to outsized revenue growth," Mark Zuckerberg, founder of Meta and FB, wrote, announcing the layoffs. "Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I decided to significantly increase our investments. Unfortunately, this did not play out the way I expected. I got this wrong,” he lamented.

He got it wrong, because, he was not pursuing realistic dreams. The social-media platforms of Meta, such as Facebook, Instagram and WhatsApp, have a traditional business model that relies on advertising. It was hit hard by the recession. Several digital advertisers pulled back in the face of inflation and the instability caused by the Russia-Ukraine conflict, and customers scaled back spending. As the tech companies tightened their belts, the labour force became the first casualty.

In October, Meta posted its second-quarter revenue decline and its profit was cut in half from the prior year. Valued at more than $1 trillion in 2021, Meta's market value has since plunged to around $250 billion. It ceased to be the behemoth, once it was. Meta's stock lost more than 71 per cent of its value this year, and it became the worst performer in the S&P 500.

The gamble of the metaverse

Once a niche concept contained in the cyberpunk novel, Snow Crash (1992), the metaverse became a buzzword when Facebook rebranded itself as Meta on October 28, 2021.

The metaverse is a virtual world that exists parallel to the physical world. In the metaverse, our digital and physical lives are overlapping, in the domains of work, socialization, productivity, shopping, and entertainment. It is enabled by advanced technologies, such as VR, AR, and MR. It is the next-generation internet for businesses, investors, and developers.

The entry point for the metaverse is, Extended reality (XR), which is a combination of augmented, virtual and mixed-reality environments that are accessible and interactive in real time. It is the pioneer of inventive applications in fields such as gaming, entertainment, enterprise solutions and simulations, as well as in military and defence.

Also, blockchain technology will play a major role in building the metaverse. While the proponents o this aspirational technology are western, the global metaverse discourse is influenced by economic giants such as China and South Korea. An array of positive factors suggests that India has a prime role to play.

The Zuckerberg company, Meta's crisis came as it is taking a gamble on building the metaverse. The hiring boom at Meta has focused on building immersive digital realms accessed through virtual reality. Zuckerberg has maintained that it will be the next great computing platform after mobile phones. He expects metaverse to replace some in-person communication. Since it is a gamble based on a stale vision, the crisis was inevitable.

There seems to be little hope for Meta’s technology which Zuckerberg claims is his company’s and our future. But,  none of us or the world at large has so far viewed him as the Messiah. Also, the multipolar world has ceased to view the U.S. as the saviour, anymore. 

Renowned technologists, who study designing use behaviour in virtual worlds, had always felt that Zuckerberg’s vision is stale and the future of Meta is on the rocks. So, the stale vision is to be blamed for the current crisis, rather than the global recession. 

There are 3D multiperson chat environments that were popularized by online games, Second Life, and now Horizon Worlds. Microsoft’s V-Chat, Comic Chat and V-worlds and the tools for creating and customizing digital avatars were the initial forays into Zuckerberg’s dream world. But it was evident to Microsoft in the 1990s itself that trying to harness the potential of the metaverse amid dramatic shifts in our digital lives, was not worth the extravaganza.

The dreams seem endless, and it is like kids create and then abandon, as in Minecraft. The magical architecture of virtual worlds is possibly a critical ingredient in the user experience and hence Meta is keen on creating 3D environments for people to hang out. But techies at Microsoft had found that these “stage sets” did not play a particularly critical role in shaping user behaviour. Instead of roaming in the virtual space, one has to work one’s way into the social structure to figure out how are things happening. People don’t encounter any sense of real life while wandering around for hours in virtual life. The virtual gathering space then becomes boring and ultimately they become empty and abandoned. This is termed a “cold state problem” by former Microsoft technology expert, Robert Fabricant.

Meta's metaverse division posted a loss of $ 9.4 billion in the first nine months of 2022, but Zuckerberg pumped in $ 36 billion between January 2019 and September 2022 to prop it up in the hopes that, at some point, people will be fools to show up at the party. When the party was about to begin, the world was pushed into penury, and no one turned up!

A decade ago, when Facebook was at a critical inflexion point as a desktop web platform with a very limited HTML 5 browser-based mobile offering, the leadership failed to recognize the smartphone revolution. They didn’t shift their focus to a mobile-first product offering in time. By pursuing the metaverse, Zuckerberg is imagining that Meta is defining the next paradigm. But in doing so, Meta has forgotten the fundamental lesson of mobile computing: Only the computing experience that is with people all the time wins. Computing that accompanies people in the world will always win over computing that takes them out of the world. 

Hence, nobody is really playing Horizon Worlds, Meta's free-to-play virtual reality metaverse that lets users create and visit “worlds” with friends or strangers. WSJ reports that of all the user-created worlds in the game, only about nine per cent are visited by more than 50 players. The rest are never visited by anyone, except Zuckerberg. The end result is empty, barren digital lands.

So, Zuckerberg’s metaverse vision is just a nostalgia trip to escape a world of complex, multilateral reality and hence his metaverse has progressed very little, scripting an American tragedy. The creative imagination of a brilliant student can any time overtake Meta’s flimsy vision and invent a compelling digital world. And it is beginning to happen.

China and metaverse

China’s Fintech Development Plan for 2022-2025 mentions metaverse while discussing reshaping financial services with intelligence, as a key task. The plan proposes that “relying on the features of 5G with high bandwidth and low delay, visual technologies such as virtual reality (VR), augmented reality (AR), and mixed reality (MR) will be deeply integrated with banking scenes to promote physical branches to upgrade to multi-horizontal, immersive, and interactive smart branches.”

In a paper on metaverse in October 2021, the China Institute of Contemporary International Relations (CICIR), linked to the Ministry of State Security, warned of the need for lawmakers to deal with virtual crimes. Similarly, in November 2021, the government of Zhejiang province organized a “metaverse industry development symposium.”

On November 1, China's Ministry of Industry and Information Technology unveiled a five-year plan for 2022 to 2026, for the development of the VR industry, aiming to achieve a target exceeding 350 billion yuan ($48.1 billion) in 2026.

This action plan is China’s first national-level policy that supports metaverse development. The document bats for creating fundamental technologies that support immersive AR, VR, and mixed-reality experiences. The policy calls for innovation in fields like full-body motion capture, gesture, eye, expression tracking, and technologies for rendering graphics.  

In China, so far over 16,000 metaverse-related trademark applications have been filed. Six of China’s tech giants – including Baidu Inc, Alibaba Group Holding Ltd, and Tencent Holdings Ltd (collectively known as BAT) – made it to the top 10 firms globally, that filed the most VR/AR patent applications in the past two years. In 2019, most of these developments happened in the fields of retail shopping, education, gaming, marketing, information display, and industrial manufacturing.

China’s VR industry accounted for about 44 per cent or US$8 billion of the global market, by the end of 2020. Big Chinese firms lack the expertise to develop VR devices, and they are investing in startups. China has over 900 million smartphone users, making VR accessible through smartphones, a priority.  AR generates less revenue than VR, and AR revenues reached RMB 21.3 billion (US$3.09 billion) in 2021. Virtual reality and virtual idols are booming, comprising an industry that is worth RMB 51 billion (US$8 billion) and RMB 3.5 billion (US$548 million) respectively.

Deloitte-China estimates that the metaverse market in China will hit 40 trillion yuan ($5.79 trillion) by 2030, equivalent to 20 per cent of China's GDP, and the electronic products and wearable devices in the metaverse will be worth $100 billion. 

According to a report by Morgan Stanley, leading Chinese tech firms have already begun to invest in a metaverse market that may be worth up to US$8 trillion in the future. J P Morgan, in a September report, suggested that the metaverse could triple China’s online-gaming market to $131 billion from $44 billion. The Bank estimates a $4 trillion total addressable market (TAM) for the metaverse in China from “converting offline consumption across physical goods and services.”

The metaverse development will have a notable impact on the entire technology, media and telecom (TMT) ecosystem. Tencent, NetEase, Bilibili, Sea, Krafton and Bandai Namco stocks could benefit from the metaverse.

Software and service vendors, such as Sight Plus, Hisense, and Mayitegong, have entered the AR market. Baidu launched a metaverse app on Chinese history, in December 2021, called “Land of Hope.” Tencent, the creator of WeChat, launched on the QQ platform, a new feature called Super QQ Show, which introduced a 3D interactive space where users can interact and play games together. 

A new app called Jelly, launched this year and developed and owned by Beijing Yidian Entertainment Technology, allows users to create online avatars of themselves and engage with up to 50 pals. It surpassed WeChat to become the most downloaded app in China’s iOS store. Byte Dance, the parent firm of TikTok, has designed two metaverse apps: Party Island for the Chinese market, and Pixsoul for the Southeast Asian one.

Metaverse was a key theme of the 5th World Artificial Intelligence Conference (WAIC2022), in Shanghai in September. Chinese internet platforms offered a "metaverse-like" viewing experience enabled by 5G and virtual reality (VR), during the Qatar World Cup soccer carnival.

Metaverse in India

China’s neighbour India is in the vanguard to build the metaverse. With the Government trying to foster a digital economy worth up to $1 trillion, the market of video streaming and gaming is seeing fresh heights. Reports project that the Indian gaming market will more than triple to $7 billion by 2026. 

 

India released its National Blockchain Strategy in December 2021. The pilot of the blockchain-backed Digital Rupee will be issued by the Reserve Bank of India, in December. The spectrum auctions to the rollout of 5G mobile services, would accelerate demand for cloud applications – including those for gaming and the metaverse. 

 

The operational challenge of building the metaverse remains, and if India is to take a leading role, investments in the private sector need to accelerate. The 18 months to August 2021 saw over $1bn of capital infused into the local video games ecosystem – more than the preceding five years combined.

 

Deloitte has predicted that the metaverse industry in India could have an economic impact worth between $79 billion and $148 billion by 2035. 

The report notes that India is among the pacesetters in the industry and that India was one of the first jurisdictions to include the metaverse in its policy considerations on cyberbullying and sexual abuse. With the country inching toward unveiling the Digital India Act, it is expected that a proper framework will be established to prevent the crimes of inciting violence and spreading misinformation on the metaverse.

India has stated that it will provide an enabling environment for Web 3 firms to experiment with new offerings for consumers in the industry. Union Minister of State for Skill Development and Entrepreneurship Rajeev Chandrasekhar announced that nothing prevents firms from exploring metaverse or non-fungible tokens (NFTs).

However, the country has signalled to use its G20 presidency to push for global digital asset regulations. The government has been relying on distributed ledger technologies (DLT) in recent months, using them for its central bank digital currency (CBDC) and streamlining local land registries’ operations.

The future of the metaverse can likewise be a big contributing factor to the development of the virtual economy. 

The ethical questions on meta-governance

India is debating the regulation of the technologies that will underpin the metaverse. The budget levies a 30% tax on income from transfers of Virtual Digital Assets (VDAs). Owning and trading non-fungible tokens (NFTs) is a pathway towards a new digital economy and this will impact the development of the metaverse. 

Beyond crypto, the metaverse raises ethical questions on privacy and security. Online risks may worsen the metaverse, through pervasive, intrusive and unwanted contacts. Pioneering efforts to find governance mechanisms for virtual worlds have to be in place and should be supported with digital literacy, safety, security and privacy which guarantee meaningful participation for participants in online communities while navigating through harmful content and behaviours.

Within the tech ecosystem, several standards have been proposed for the metaverse, but the incentives for adopting them are governed by the self-interests of a few western companies in taking control. It will not be possible for a single metaverse to exist if laws for monetising and moderating the metaverse are made and enforced differently around the world. Until recently, the western policy agenda has dominated companies, products, and rules.

The European Commission has suggested that plans to create an all-encompassing virtual reality environment would pose new challenges for antitrust regulators in the EU and has demanded further scrutiny of the development of the economic models of the metaverse. 

South Korea recently created a ‘metaverse alliance’ to facilitate the development of virtual and augmented reality platforms. In China, a metaverse industry group, the Metaverse Industry Committee, formed under the state-supervised China Mobile Communications Association in December 2021, has the stated objectives of strengthening innovation and integration among metaverse builders, organizing the training of professionals, and promoting new thinking.

India always has espoused the doctrine, of Vasudhaiva Kutumbakam, a Sanskrit phrase found in ancient texts such as Maha Upanishad, which means “The world is one family”. This expression is a constant refrain in Prime Minister Narendra Modi’s speeches. During his speech at the Davos Agenda 2022, he indicated that a collective and synchronized, global approach is needed towards addressing challenges with cryptocurrencies. 

This policy of oneness should be applicable, in the case of the metaverse, too. All the Indian scriptures expound on the victory of good over evil, and in a war between reality and virtual reality, in a conflict between reality and metaverse, reality has to be victorious and spread its wings even in the mythical and mysterious horizons.

© Ramachandran