China Takes Major Steps in Embracing Blockchain

Even though China has previously taken a strong stance against cryptocurrencies and Initial Coin Offerings, its position towards blockchain is quite the opposite. Since 2016, local governments across the country invested over $3.57 billion in startups and blockchain-related R&D, according to supchina.com. And it’s not just governments. Large Chinese corporations are also embracing blockchain. According to a recent report by Nikkei Asian Review, Alibaba Group Holding Ltd. (NYSE:BABA) is responsible for 10% of global patent applications for blockchain. Moreover, Chinese tech giants, such as Tencent Holdings and Baidu, collectively account for 56% of all patents related to distributed ledger technology, adds the report that cites Thompson Reuters data.

China Is Betting Big on Blockchain

Companies filed over 400 patent applications related to blockchain technology last year. Companies based in China not only dominate the list but the country is well ahead of the US, whose companies are responsible for just 22% of all patents filings, according to the source. It’s not surprising because Chinese tech companies are on a constant lookout for new investment avenues.  For example, Alibaba Group Holding Ltd. (NYSE:BABA) is the country’s top eCommerce company. However, its wholly- or partly-owned subsidiaries operate in a range of industries from bike rentals to finance and healthcare. The same goes for the country’s top search engine operator Baidu and Tencent Holdings, which is actually a tech and internet focused investment company.

In some cases, companies are not just filing patents for future uses of blockchain, but are already implementing solutions. For example, Alibaba Group Holding Ltd (NYSE:BABA) is planning to use blockchain to allow tracking of the supply chain. For example, at the end of this month, Alibaba’s Tmall platform will fit a QR code on Wuchang rice packets. The buyers will be able to scan the code with the Alipay app and access information about the rice, including where it was harvested. Overall, Alibaba filed 43 patents for blockchain-related applications last year.

However, Alibaba Group Holding Ltd (NYSE:BABA) is not the leader in blockchain patents. That spot is actually held by People’s Bank of China, which, together with subsidiaries, holds 68 patent applications. The bank that trails PBC is Bank of America Corp (NYSE:BAC), which has only 33 applications.

Communist Party Is Embracing New Technology

People’s Bank of China, which holds the top spot in terms of the filed patents, is the central bank of the country, therefore it’s under full control of the Communist Party. The fact that it is working so actively on developing blockchain applications underlines the support that the technology has from the Communist Party. Last month, the party issued a book, “Blockchain- a Guide for Officials.” The book is a series of articles aimed at explaining to top Communist officials what blockchain technology is all about. Moreover, earlier this year, the country’s president Xi Jinping endorsed blockchain technology. At an academic conference in May, Xi said that blockchain, AI, IoT are changing the world’s economic structure.

Other state-owned companies are also working closely with blockchain technology. On September 1, People’s Insurance Company of China (PICC) announced a partnership with DNV GL and VecChain. They will develop blockchain solutions and contribute to the goal of mass blockchain adoption. PICC believes that blockchain would improve turnaround time, premiums, and reduce fraud.

Moreover, Industrial and Commercial Bank of China (ICBC) Chairman Yi Huiman has recently reiterated the bank’s focus on blockchain technology. ICBC, which is the country’s largest bank, will reportedly work on technological innovations, including big data, blockchain, AI, and IoT. The bank might also make some of its achievements open to other enterprises. In April, ICBC filed its first patent application with the country’s Intellectual Property authorities involving blockchain. The patent includes a system that would use distributed ledger technology to issue certificates.