China integrates blockchain into all sectors of society
In October 2019 Chinese President Xi Jinping noted: “We must take the 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 blockchain technology development in China and delivered a strong signal that the central government will support and devote more resources to this area according to a study published in Research in International Business and Finance journal. Following this, the Communist Party of China 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 component of China’s blockchain strategy is the Blockchain-Based Service Network launched in 2020. According to a CoinDesk report from March 2021, BSN offers a government-controlled framework for blockchain developers, supporting applications built on multiple blockchain networks. The system provides two versions: one for users inside 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, stating, “If they do something wrong we can delete the whole chain,” as reported by Coindesk.
In March 2021, the Chinese government formally incorporated 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. This push aims to enhance China’s global competitiveness in critical economic sectors through what officials term “Chinese-style blockchain” – blockchain without cryptocurrencies, according to a research article published in the Big Data & Society journal.
The Chinese city of Shanghai issued an implementation plan on July 31, 2023 to promote the development of its urban blockchain digital infrastructure system for the period of 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 hub according to an article on Cointelegraph.
The government views blockchain through the lens of ‘state techno-solutionism,’ a technological tool to boost national competitiveness and modernize agriculture. This approach aligns with broader national goals, including what Chinese officials refer to as the ‘rejuvenation’ of the nation. Such a perspective stands in contrast to the Western cypherpunk blockchain movement’s vision of decentralization and freedom from governmental and corporate control according to the article in Big Data & Society journal.
Government Policy And Investments In Blockchain
According to various news on the Chinese government website, the country is integrating blockchain technology into various sectors. Among these, in 2024 China uses blockchain to propel its foreign trade, in social and economic development, the 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 goal of training at least 500,000 blockchain professionals for the country. For comparison, there are currently only about 26,000 active blockchain developers worldwide, according to data from the Developer Report website.
In August 2023, at the Hangzhou Summit, officials unveiled a blockchain-powered data exchange platform. The Hangzhou Data Exchange uses distributed ledger technology to enable enterprise IT data trading, providing a system for immutable and traceable transactions, according to a report by China News Network. Over 300 enterprises, 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-name identities of China’s 1.4 billion citizens. This system aims to provide a form of “pseudonymity” where users can register and log in to websites using DID addresses and private keys, keeping their real identities hidden from other users and businesses. However, the government retains the ability to link these digital identities to real individuals when necessary, according to a report by CoinDesk.
Blockchain Will Fuel The Belt And Road Initiative
On March 30, 2024, China launched its national key R&D program for an ultra-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, Europe, and Africa.
One Belt, One Road, Chinese strategic investment
The Belt and Road Initiative, estimated to cost between $1-8 trillion, is one of the largest economic development projects in history. It includes the “Information Silk Road,” a digital dimension comprising deep-sea internet cables and satellites. This digital infrastructure overlays the physical BRI corridors, creating a foundation for advanced software-based services, including blockchain applications. The integration of physical and digital elements positions the BRI as a comprehensive system of land, sea, and space connectivity, potentially revolutionizing global trade and economic cooperation, according to Wolfgang Lehmacher’s study published in the Port Technology International journal.
“The time is now to view geopolitics through the lens of blockchain technology,” writes anti-financial crime expert Douglas McCalmont in his LinkedIn post. He notes that “China will soon maintain a powerful and insular global (parallel) economy to challenge all things US.”
Blockchain Modernizes China’s Agricultural Sector
The Ministry of Agriculture and Rural Affairs has issued guidelines encouraging social capital investment in innovative agricultural technology enterprises, with a specific focus on key agricultural technology research and blockchain application promotion.
The agricultural sector implements social credit systems in rural areas using blockchain technology. For instance, in 2020, Qingyuan, Guangdong province, introduced a blockchain-based system called “Persimmon Points”, according to a study published in the Big Data & Society journal. This system allows participants to earn points for “positive actions” and lose points for perceived negative behaviors, with the data transparently recorded on a public blockchain.
Another example is the GoGoChicken project, a collaboration between local governments and a blockchain technology company, uses blockchain and IoT devices to record and monitor the entire chicken production process, from breeding to sales. Positioned as a poverty alleviation tool, the project caters to safety-conscious urban consumers willing to pay premium prices for traceable food products. However, the article in Big Data & Society journal raises questions about the project’s potential impact on farmers’ data control and empowerment. The study argues that “Blockchain fortifies the extraction and exploitation of data, granting businesses greater access and control over information belonging to vulnerable groups.”
US Respond To China’s Blockchain Advancements
China’s rapid advancement in blockchain technology has raised concerns in the United States, leading to legislative action. According to a report by CoinDesk, in November 2023, U.S. lawmakers introduced the CLARITY Act, proposing to bar federal government officials from doing business with China-based blockchain firms 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 foreign access to national security intelligence and private information. The Act also directs U.S. agencies to develop a plan addressing risks from China’s blockchain technologies.
Blockchain Gambit
China’s 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 technology that provide greater control to the Chinese Communist Party’s 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 take advantage of blockchain’s potential while maintaining tight control over its financial systems on the mainland.
As noted in the article by Ben Schreckinger in POLITICO, this strategy enables China to “exert internal financial controls on the mainland while impeding capital flight to bet on the potential of global crypto networks to disrupt money and finance.” Schreckinger further observes: “Inside China, Beijing will be able to keep the world’s biggest population and second-largest economy running on financial networks it designs and controls (and push trading partners to join them) — without giving up its ambitions to make China a player in the more unruly crypto networks used elsewhere.”