China is betting on massive blockchain infrastructure

In October 2019, Chinese President Xi Jinping said: “We should regard blockchain as an important breakthrough for independent innovation of core technologies, clarify the main direction, increase investment, and accelerate the development of blockchain technology.” » according to the study in the Journal of Physics: Conference Series.

The speech resolved the uncertainty of the development of blockchain technology in China and sent a strong signal that the central government will support and devote more resources to this area, according to a study published in the journal Research in International Business and Finance. Following this, the Chinese Communist Party made a decision, recognizing data as an equal factor of production alongside traditional inputs like labor and capital.

Blockchain as a Chinese national strategy

A key part of China’s blockchain strategy is the blockchain-based service network launched in 2020. According to a March 2021 CoinDesk report, BSN offers a government-controlled framework for blockchain developers, supporting applications built on several blockchain networks. The system offers two versions: one for users in China and another for international developers.

Notably, the domestic version allows authorities to censor or delete entire blockchains if deemed necessary, with CEO Yifan He of Red Date, the company behind BSN, saying: “If they do something wrong, we can delete the entire chain,” as Coindesk reports. .

In March 2021, the Chinese government officially integrated blockchain development into its national strategy with the approval of the “14th Five-Year Plan” (2021-2025). This plan includes blockchain industry development initiatives for 29 provinces and cities across the country. The initiative aims to boost China’s global competitiveness in critical economic sectors through what officials call “Chinese-style blockchain” — blockchain without cryptocurrencies, according to a research paper published in the journal Big Data & Society.

The Chinese city of Shanghai released an implementation plan on July 31, 2023 to promote the development of its blockchain urban digital infrastructure system for the period 2023-2025. The plan aims to strengthen blockchain applications in Shanghai’s economy and governance, supporting municipal affairs and coordinating resources in the Yangtze River Delta to create an international blockchain center, according to an article on Cointelegraph.

The government views blockchain through the prism of “state techno-solutionism,” a technological tool intended to boost national competitiveness and modernize agriculture. This approach aligns with broader national goals, including what Chinese officials call the “rejuvenation” of the nation. Such a perspective contrasts with the Western cypherpunk blockchain movement’s vision of decentralization and freedom from government and corporate control, according to the Big Data & Society journal article.

Government policy and investments in blockchain

According to various information published on the Chinese government website, the country is integrating blockchain technology in various sectors. Among these, in 2024, China will use blockchain to power its foreign trade, social and economic development, digital trade sector and the creation of new information infrastructure. Additionally, courts at all levels are exploring the use of blockchain to improve judicial processes. This integration is happening alongside other advanced technologies such as 5G, artificial intelligence, Internet of Things and big data analytics.

In May 2023, China established a national blockchain research center with the aim of training at least 500,000 blockchain professionals for the country. For comparison, according to data from the Developer Report website, there are currently only around 26,000 active blockchain developers worldwide.

In August 2023, at the Hangzhou Summit, officials unveiled a blockchain-based data exchange platform. The Hangzhou Data Exchange uses distributed ledger technology to enable the exchange of enterprise computer data, providing a system of immutable and traceable transactions, according to a report from China News Network. More than 300 companies, including Alibaba Cloud and Huawei, participated in its debut.

In December 2023, China’s Ministry of Public Security launched RealDID, a blockchain-based platform to verify the real identities of China’s 1.4 billion citizens. This system aims to provide a form of “pseudonymity” through which users can register and log in to websites using DID addresses and private keys, thereby keeping their true identity hidden from other users and companies. However, the government retains the ability to link these digital identities to real individuals when necessary, according to a report from CoinDesk.

Blockchain will power the Belt and Road Initiative

On March 30, 2024, China launched its key national R&D program for a super-large-scale blockchain infrastructure platform for the Belt and Road Initiative – China’s global strategy to expand its economic and political influence through improved trade routes and infrastructure across Asia and Europe. , and Africa.

The Belt and Road Initiative, estimated to cost between $1 trillion and $8 trillion, is one of the largest economic development projects in history. It comprises the “Information Silk Road,” a digital dimension comprising deep-sea Internet cables and satellites. This digital infrastructure overlays the physical corridors of the BRI, creating a foundation for advanced software services, notably blockchain applications. The integration of physical and digital elements positions the BRI as a comprehensive system of land, sea and space connectivity, with the potential to revolutionize global trade and economic cooperation, according to the study by Wolfgang Lehmacher published in the journal Port Technology International.

“The time has come to view geopolitics through the lens of blockchain technology,” writes Douglas McCalmont, an expert on fighting financial crime, in his article on LinkedIn. He notes that “China will soon maintain a powerful and insular (parallel) global economy to challenge everything about the United States.”

Blockchain modernizes the Chinese agricultural sector

The Ministry of Agriculture and Rural Affairs has issued guidelines encouraging social capital investment in innovative agricultural technology companies, with particular emphasis on research into key agricultural technologies and promotion of blockchain applications .

The agricultural sector is implementing social credit systems in rural areas using blockchain technology. For example, in 2020, Qingyuan in Guangdong province introduced a blockchain-based system called “Persimmon Points,” according to a study published in the journal Big Data & Society. This system allows participants to earn points for their “positive actions” and lose points for perceived negative behaviors, with the data recorded transparently on a public blockchain.

Another example is the GoGoChicken project, a collaboration between local governments and a blockchain technology company, which uses blockchain and IoT devices to record and monitor the entire chicken production process, from breeding to sale. Positioned as a poverty reduction tool, the project targets security-conscious urban consumers willing to pay higher prices for traceable food products. However, the Big Data & Society journal article raises questions about the project’s potential impact on data control and farmer empowerment. The study claims that “blockchain strengthens data extraction and exploitation, granting companies greater access and control over information belonging to vulnerable groups.”

US reacts to China’s blockchain progress

China’s rapid progress in blockchain technology has raised concerns in the United States, leading to legislative action. According to a report from CoinDesk, in November 2023, US lawmakers introduced the CLARITY Act, proposing to ban federal government officials from doing business with and using China-based blockchains. The bill prohibits transactions with iFinex (Tether’s parent company), The Spartan Network, and The Conflux Network. It aims to prevent foreigners from accessing national security intelligence and private information. The law also directs U.S. agencies to develop a plan to manage risks related to Chinese blockchain technologies.

Blockchain Gambit

The Chinese approach to blockchain technology demonstrates a strategic duality. On the mainland, Beijing has banned global crypto networks while developing and promoting versions of next-generation monetary technologies that provide greater control to the Chinese Communist Party government. Meanwhile, through Hong Kong, China maintains a presence in global crypto markets, leveraging the city’s special administrative status as a financial gateway. This two-pronged approach allows China to leverage the potential of blockchain while maintaining tight control over its financial systems on the continent.

As noted in Ben Schreckinger’s article in POLITICO, this strategy allows China “to exercise internal financial controls on the continent while preventing capital flight to bet on the potential of global crypto networks to disrupt money and finance. Schreckinger further observes: “In China, Beijing will be able to run the world’s largest population and second-largest economy on the financial networks it designs and controls (and will push its trading partners to join them) – without giving up its ambitions to make China a player in the more unruly crypto networks used elsewhere.