We know this in part because CICIR, a state-run think tank which serves as the research arm of China’s foreign intelligence apparatus, recently released a fascinating whitepaper analysing the risks and opportunities the Metaverse may pose for China. What emerges is a Chinese state that seems fundamentally conflicted about how to approach virtual reality.

On the one hand, the paper explains how embracing the virtual could provide some significant benefits to Beijing. It could produce a future in which eventually “the distinction between virtual and reality will lose its meaning” and “the Metaverse becomes a ‘real world’ that exists parallel to the real world.” In doing so, it could “realise the integration” of the virtual with the real and “deeply change the structure and operation of existing society,” but more quickly and at “a lower cost” than a digital “transformation of the real world” based on the ‘Internet of Things’.

The paper also notes that “the Metaverse will become an integral part of a country’s political thought… and political security.” For a state now adept at leveraging digital technologies for political control, this could actually pose more upside than risk. Even more importantly, it argues that the Metaverse could “become the second space for human existence, and provide people with new lives in another dimension, giving birth to… secondary identities, secondary social relationships, and idealised lifestyles.”

Here the paper seems to be offering up the tantalising possibility that Chinese president Xi Jinping’s new signature goal of “Common Prosperity” (addressing growing popular dissatisfaction with high income inequality and low social mobility) might be more easily achieved not in the real world but through a purely virtual life of infinite mansions and Maseratis to placate the masses.

If this is the way to go then China should move quickly, the paper warns, as countries with “first mover advantage” could achieve “technological hegemony,” after which others’ companies could be out-competed and forced out of the market. It was perhaps for this reason that in 2020 China included “virtual and augmented reality” as one of seven core strategic industries to prioritise with state support in its comprehensive Five-Year Plan for 2021-2025.

But, on the other hand, CICIR acknowledges the Metaverse could also come with significant risks. The development of an immersive virtual world could lead to “profound changes in the social structure” that are difficult to predict. It could make the impact of cyber attacks much worse, be “used by criminals to create addictive digital drugs,” and “have a negative impact on the growth of young people.” Those “who stay immersed for too long may become socially detached from those in the real world.”

It is on this last risk that Xi Jinping has signalled where he stands. With a dire demographic crisis the last thing Xi wants is China’s young working-age population spending all its time on virtual distractions. In speeches Xi has repeatedly castigated the “fictitious economy” of internet companies. In September, amid a wider anti-monopoly crackdown by Xi on China’s largest technology companies, Chinese regulators imposed strict limits on gaming by minors, with state media blasting video games as “electronic drugs” and “spiritual opium.”

In the end the wider world may become addicted to that drug, with the Metaverse becoming what a character in the novel Ready Player One describes as “a pleasant place for the world to hide from its problems while human civilisation slowly collapses, primarily due to neglect.”

Meanwhile, under Xi, China may decide the bigger opportunity is to remain grounded in mundane reality while the rest of the world loses itself in the Metaverse.

N.S. Lyons is the author of The Upheaval on Substack.