Is China the world's blockchain leader?

Written by || April 12 2019

China may be the only country in the world able to stamp out cryptocurrency while repurposing its underlying blockchain technology. Decentralization becomes centralized under this scenario, as private enterprises implement blockchain solutions in line with central government directives. It's a bit like the "socialist market economy."  The key to success here is acceptance of seemingly contradictory principles, one of Beijing's specialties.

With that in mind, despite its purge of crypto exchanges and mining, China is becoming a blockchain juggernaut, at least in terms of projects underway. By the estimates of Beijing-based data service provider Blockdata (in an April report), China is leading the world with 263 blockchain projects - 25% of the total globally - in the pipeline as of November 2018.

Beijing-based think tank EO Intelligence identifies 615 blockchain firms in China, more than 80% of which were founded from 2016-18. Half of the firms are deploying blockchain in the finance sector.

Li Qilei, chief technology officer at blockchain platform developer Qulian Technology, told that the financial sector is deploying blockchain heavily in asset securitization for banks and brokers. On an accounts receivable platform Qiulian launched with China Zheshang Bank in August 2017, the scale of financing has reached hundreds of billions of yuan, Li said.

At the same time, China leads the world in approved blockchain patents, with 790, according to data compiled by the World Intellectual Property Organization. In second place is the United States with 762 approvals, then South Korea with 161 Australia with 136, while Canada and India have 67 approvals each. China's Alibaba is among the individual companies that have filed the most patents.

Yet for all the hype surrounding blockchain, there remains a big elephant in the room: how it can be implemented widely. This problem may matter less for China than more purely market-driven economies, which are less able to play the long game, but it still matters.

Kang Li, assistant director at the Chengdu-based Blockchain Research Center of China, told that blockchain remains in a "blossoming phase" in China, in which "more and more companies can come up with all kinds of chains, but they don't have an explicit idea of application service or supporting content."

In November 2018, the People's Bank of China warned of a blockchain bubble in a policy paper. The paper described "shortcomings in blockchain's economic functions" and noted: "There are few blockchain projects that really land and produce social benefits. The PBOC called for firms to "rationally...assess what the blockchain can and cannot do."