Blockchain in China-China Crypto Valley 101 part 1
One of the most famous and well known financial cities in China- “Shanghai”
Have you ever heard about “Crypto Valley”?
If you do, you might imagine about silicon valley or maybe the small emerging city of Swiss, Zug. Yes, Maybe you are right.
But, Did you know that China also has a lot of cities that can be referred to as “Crypto Valley”? Before this article begins, I would like to comment on the previously mentioned city of Swiss, Zug.
Swiss “Zug”, the small city of blockchain, has been reborn and now branded as “Crypto Valley”
At the beginning of February 2018, the Swiss Financial Market Supervisory Authority FINMA (Swiss Federal Financial Supervisory Authority) officially announced the ICO Regulation Guidelines.
Regulation Guide (Korean) :
https://steemit.com/finma/@nacong/finma-ico
Regulation Guide (Official- English): https://www.finma.ch/en/news/2018/02/20180216-mm-ico-wegleitung/
This small European country has taken a firm stand and formally regulated blockchain and ICO’s, clearly showing the world that their opinions on ICO projects, do not always fall under the category of scam but as projects that integrate the innovative tech, blockchain.
Like this, the big picture of Zug has just begun.
Nowadays, Zug is labeled a “Blockchain Hub City”, “A Crypto Valley” from various enthusiasts globally.
Currently, In total about 450 blockchain companies from the world, more than half of them opened their shops in that city. Ethereum, Bitcoin, and also Hdac, a Korean blockchain project, which has raised 300 billion Korean won(about 268,471 USD) all now reside in this new emerging city.
According to statistics, 40% of ICO projects’ fundraising ( about $ 3.9 billion) also took place here.
This small city which has only around 150,000 people reside, has attracted various blockchain companies with more than 30,000 high-value-added, Conferences and meetups held. According to the latest report, the city has created over more than 100,000 jobs.
How could this small city be quickly transformed into an outstanding blockchain “Hero” in the world?
- Corporate Income Tax is only 14.6%! In the near future, it will be even lower!
In addition, for foreign companies, they only need to pay 9 to 10%. Non-profit corporations boast a tempting nearly 0% tax rate.
Singapore, currently referred to as a “paradise” for corporates and startups is currently thinking about lowering its tax by 20% or 15% by 2020, whilst Zug is already there.
2. The government will support you with whatever you choose to do!
Through my research, I can hardly find any negative regulation for blockchain startups.
The Swiss government itself has a very open view of regulations, they do not enforce the administrative orders to corporates, Instead, it collects the opinion from the people proactively and makes the policies based upon those opinions.
All those government's officers have done is minimize regulations and to allow sure the sustainable growth for blockchain projects.
According to Credit Suisse's report, So far, over 170 blockchain companies have been established in that small city, the share of the percentage of IT talents is more than 3 %, it is much higher than the national average(about 1%).
From a country so friendly towards this new emerging tech to one not so much. The most emerging country in the world, China have a very unique opinion on this, one that many would say, is a bit over the top.
Ironically, China is the one who holds the most patents for blockchain technology.
Let’s find out what is going on in China, and where it’s “Crypto Valley” is.
Candidate no.1 Shanghai: Shanghai’s Cold response to blockchain “love call”
Shanghai is one of the biggest cities in China, and According to the latest announcement of China central gov, they are planning to make Shanghai into the Top 3 Financial Hub city in China by 2020.
If you look towards the Bund(外滩) in Shanghai, you will be presented with the Oriental Pearl Tower, along with a row of well-known buildings belongs to many banks and financial groups lines.
At the center of Shanghai city, you can also find various blockchain startups and VCs, Such as Wanxiang, who recently held the biggest blockchain conference in Shanghai, NEO, known as Chinese Ethereum, VeChain, who is partnering with Louis Vuitton, Draper Dragon which is established by Tim Draper, FBG Capital and so on.
In China, however, Shanghai is still not considered as one of the “blockchain hub cities”. Why is that?
These two words, “conservative and laid-back”, can exactly describe the Shanghai government’s attitude towards blockchain industry. In contrast, Shanghai’s neighboring cities of Hangzhou, and Suzhou struggling to become a leading blockchain hub cities. Very ironic.
Shanghai is now bustling with capital, talent, and information. But why is the reaction towards blockchain and DLT market so tepid?
1. The attitude of the government is lukewarm, but The policies are rolling out so quickly!
According to the left table, Shanghai has launched its first blockchain policy at the end of 2016, when the Crypto boom has already come.
The Shanghai Economic and Information Committee has officially announced the policy on December 28, 2016, which would officially support R&D centers and projects located in the city.
Furthermore, until the year 2018, a total of six policies were released.
According to these policies, the Shanghai government has a very strong tendency to industrialize blockchain and its technology but not in a commercial way.
It means that their attitude towards blockchain is perceived to be macro-perspective, as they are seeing a “big picture” for the future.
2. Shanghai always hungry for blockchain talents.
According to the graph above, the average number of income in Shanghai is about 8742 USD(59,000 CNY) a year, twice higher than the national average income in China in 2017.
In addition, 21.95% of citizens of Shanghai has received high education (ie, more than a college or university degree), meaning One in five is a highly talented person with higher education.
However, Shanghai still is lacking for experts who are specialized in blockchain fields, especially in technology.
According to the graph “The Demand proportion ratio of talents of blockchain field in Shanghai”, it is obvious that there is a high demand(around 74%, more than a half) of blockchain technology related talents, rather than other fields.
As one of the employees in one of the blockchain start-ups right now, I can say for certain, UI, UX designers, and Blockchain Architects are currently in very high demand, with these position seeing the highest turn-over rate.
We are in an emerging industry, it is very difficult to find talented people who are knowledgeable about blockchain technologies, even cannot find one those who are familiar with the industry.
3. Lack of support towards blockchain industry, the number of projects is drastically reduced! Only private enterprises remain in existence!
Most blockchain projects and firms in Shanghai were born in 2016 and 2017 when the crypto boom was in full swing. From statistics shown in 2018, you can see a huge drop in the graph due to the on going bear market.
For the two reasons that I mentioned above, Shanghai is the place where blockchain projects can have plenty of resources and capital, but there are no precise regulatory and related support measures for blockchain at the same time, So most blockchain projects and startups cannot last more than a year or two, and in result, have to shut down their businesses.
If there is a clear regulatory and supportive policy like Swiss Zug, then I am sure that Shanghai can be a leading blockchain hub city in the coming years.
The major companies that are driving blockchain industry in Shanghai now are small-medium sized business (SMB) or private companies.
Among them, there are Wanxiang Group, which is the most famous and well-known firm in China blockchain industry, and the other labs and R&D centers which has an academic research purpose are on the list too.
The problem is that they are private companies, and most are not supported by the government.
When we think about the giant IT companies in China, Why can these Top 4 key players, Alibaba, Baidu, JD.com and Tencent continue to expand their market coverage so wide?
Enormous support of the Chinese government, that is the answer that I should say.
Alibaba is the most huge e-commerce company which has a strong connection with the Chinese government. Backed by the central government of China, they will complete their long-term mission, the IPO in mainland China very soon, the first IT company to do so. IPO’s are generally frowned upon to be conducted within mainland China unless general backing from the government. With companies as BJT, also finding themselves waiting for the orders from the government.
Without the help of the government, in a word, it is really hard to carry on your business in China.
In conclusion, without the support of the Shanghai local government, it will be hard to find a bright future for blockchain projects and companies which want to continue and expand their business in China sustainably.
Ultimately meaning, the blockchain industry of Shanghai will be going languish.
If Shanghai wants to be one of the big players in the international stage, it needs to start paying more attention to the Blockchain industry and its technology more.
We all should know that it is difficult to lead the fourth industrial revolution era with that “lukewarm” attitudes and such a slow adoption rate.
The Next episode will be about the city which is well known for IT and technology in China.
Keep up to date with my “China Crypto Valley 101” Episodes!
To be continued.....
I am a Korean blockchain content creator, currently based in Shanghai.
I am willing to research and analyze all the fresh and interesting blockchain projects and industries!
If you have any projects you would like researched, please reach out via any social media below.
For my previous articles in Korean, you can find them below：
- Brunch Blog (Korean)
- Kakao: amykang76
Written and Edited by Amy Kang
