China, the Blockchain & Quantum Computing: The Bottom Line.
In this Asia-Pacific Insight, Gilbert Reveillon, Christophe Granier, and Paul Clerc-Renaud explore the idea that new technologies have the power to impact us in ways we have not yet considered… especially as far as China is concerned. On paper, the Blockchain technology is being developed to provide immediate and secured networks, while quantum computing capabilities aim at enabling increasingly complex calculations impossible to operate from normal computers and at an unrivaled speed. As of today, China is at the forefront. China invests heavily in supporting the development of Blockchain and quantum computing know-how, and in the field, the Chinese BATXHJs (Baidu, Alibaba, Tencent, Xiaomi, Huawei, JD) are already competing with the American GAFAs (Google s, Apple, Facebook, Amazon) when it comes to technological domination… fighting for supremacy.
The question, in other words, is not to figure out whether China is making progress. It is to determine how China will tilt the balance in its favor. Because don’t be mistaken, it will on many more digital landscapes.
Blockchain and Quantum Computing Transformation: New Paths for China?
[By Gilbert Réveillon, with Christophe Granier and Paul Clerc-Renaud]
Encrypted data storage and transmission technologies characterized by the absence of institutional control – understand, the Blockchain – are the subject of widespread thinking in the industry and services sectors these days. In practice, many platforms and algorithms already exist, in the form of vertically integrated systems in the industry, or alternatively with a logic of transverse ecosystems.
If China is no exception to the rule, the Belt and Road Initiative (BRI) will only accentuate the trend. As a non-necessary reminder, the BRI (and the freight activity which is at its core) will generate massive flows from East to West. Ninety percent of the value of the goods transported on this axis go from China to Europe. And, as it turns out, the technological infrastructure is already present and active. The Blockchain technology is developed to provide immediate and secured networks. In addition, quantum computing capabilities will enable increasingly complex and fast calculations impossible to operate from normal computers.
The question is, could such changes spread on a large scale push China into a quantum transformation providing it with increased leadership, beyond all expectations?
China is equipped but there is more to it. China also regulates, and it organizes itself.
Even though the blockchain is not a Chinese technology, ninety percent of Bitcoin miners are already operating from China. More importantly, blockchain projects are supported by the Chinese authorities, with various priorities being progressively established. Some favorable regulatory frameworks are set up in line with the legendary and flourishing free trade areas of the Pearl River Delta or Shanghai. But outside domestic markets are also becoming more Blockchain-friendly, mainly due to the cross-border e-commerce organized by giants such as Alibaba, Tencent or JD.
The technological transformation is not only a matter of permitting, however, and Beijing also makes sure that disruptive technologies do not harm the system. From a financial technology perspective, necessary restrictions have been imposed over the past decade. A law prohibited the use of QQ Coin outside of Tencent’s mobile games already in 2006. Over ten thousand crowdfunding platforms and peer-to-peer (P2P) loan providers were drastically regulated in 2016 to protect Chinese investors from the risk of default. And the proliferation of cryptocurrency overflows in late 2017 was managed with a bitcoin funding prohibition to protect (again) domestic investors from the highly speculative crypto-asset as well as from risky technology-fueled temptations more generally with ICO (Initial Coin Offering).
>> Related Reading: China bans Bitcoin & Crypto-currencies: some trends.
For the Chinese regulator, this interventionism is essential but it does not aim at discrediting the underlying technological developments behind the bitcoin. To the contrary, the objective is to organize and structure the growth path. With the Blockchain, the stake is to prepare a new era of trade confidence. More goods are sold, safely, as rapidly understood by Alibaba group, which has adapted food traceability and trustworthy accountability mechanisms to its own trade.
Careful planning and technological breakouts.
Careful planning creates a competitive advantage because the main stakes are identified: transparency, traceability, security of exchanges, distributed ledgers, smart contracts, validation consensus (proof of work, proof of stake, Proof of Authority, etc.). Not to mention the hundreds of alternative ways now made available to intelligently and efficiently authenticate, validate, organize and transmit the power and decisions of decision-makers and influencers at operational and corporate governance levels.
As a result, automated design phases and concept proof phases are now commonplace in various Chinese industries, which have already established reliable systematic production processes. The major global players are up to date, but so are the Chinese startups commonly assisted by well-known software editors such as IBM, Accenture, SAP or Microsoft.
In fact, although the GAFA (Google, Apple, Facebook and Amazon) have tremendous expertise on the matter, some significant breakouts have taken place on China’s side of things. The BATXHJ blockchain platforms (Baidu, Alibaba, Tencent, Xiaomi, Huawei, JD.com) have for instance produced a variety of blockchain white papers. Unsurprisingly, all are more ambitious and impressive than the others. And all aim at conquering the international scene.
The common point to all these “game changers” coming out of China is simple: an impressive know-how in their respective field of digital expertise and world leader postures giving them means to use the blockchain as a powerful leverage tool.
The challenge of knowledge acquisition for China.
In terms of hardware, China’s superiority is evident. After all, let’s not forget that the world’s top three blockchain equipment vendors are Bitland, Jianan Zhizhi and Yibang Technology. Nonetheless, knowledge acquisition remains a very significant challenge for the digital industry.
In several provinces, the lack of human resources in the field is pushing universities to explore more effective talent training models. And, at the end of the day, they have little choice but to move on with the transforming trend. Starting with the BATXHJ platforms, indeed, the major players all deploy global acquisition and appropriation strategies to make sure that their disruptive technologies (and standards) will be adopted by digital communities dependent on their smartphones to conduct their daily lives.
JD launched its “Jingdong Coalition for Quality Anti-Counterfeiting” (JQACC) with clearly international expectations, but another practical application of the blockchain technology is also explored to secure financial operations. Since 2017, several Chinese banks have begun to design a domestic alliance for the secure exchange of messages, and the blockchain has naturally become the basis of their trading platforms.
This infrastructure, which applies to loans and guarantees, but also to factoring and discounting, can be opened quickly to agencies abroad and to correspondent banks. On June 25th 2018, in fact, Alibaba’s boss Jack Ma furthermore announced the success of a 3-second blockchain transfer between Alipay Hong Kong and the GCash-compatible system in the Philippines, announcing its intention to expand rapidly this service to the whole world challenging de facto the world leading remittance market players. None of them has the data lake allowing a new stage of Artificial Intelligence milestones… AI & Blockchain are cross-fertilizing and the size of the data lake already in use is of the utmost strategic leadership.
The Song of Quantum: new musicalities and clashing spheres.
This new use of transparent systems and the increasing reliance on technology-fueled communication methods disrupt the established order. The former organizational models and traditional ecosystems get challenged, leading to increased productivity and transparency for all stakeholders.
At the same time, quantum computing and Blockchain expertise might also build an additional layer of “digital supremacy”. China and Russia are already on track because these complementary (much disruptive) technologies both have the potential to help to secure data exchanges on a widely underestimated scale and ten of millions time faster to compute specific tasks. Combine these technologies to leverage the synergies, add a dose of traceability throughout the value chain and make the encryption inviolable at the new magnitude of speed, what you get is a new leadership, power and influence.
For this reason, in China the public authorities exercise direct supervision over the development of encryption standards, which at some point might possibly expose foreign companies to new challenges. Yet, NSA’s revelations of large-scale telecommunications espionage make quantum cryptography an indispensable solution and China seems to be ahead of its competitors as far as this new security market is concerned. The Jinan Institute of Quantum Technology already deploys in Shandong a secure link network (available to 200 users) in which any hacking attempt automatically triggers a change in the light particles used for encryption and warns the network of the threat.
China’s Blockchain and quantum computing for power in the cloud?
So new technologies are taking over on a variety of topics, and chances are that significant change will take place in the cloud for a new set of architecture, somewhere over there.
On the one hand, crypted solutions are at the heart of the deployment of the blockchain, smart contracts, validation consensus, smart tokenization. But quantum solutions are also ten million times faster (10 power 8 according to Google’s scientific papers) at cracking the encryption keys on which all our digital lives rest. Reverse engineering of encrypted private keys which would take 300 years to crack with traditional computing would take a matter of minute with QC…
The Mozi satellite (named after the philosopher Micius) and the military project QUESS have both succeeded in operating perfectly inviolable quantum communications between Vienna (Austria) and Beijing. Alibaba has also developed a cloud-based commercial offer of quantum computing for individual consumers. In sum, tremendous capacity-building is surfacing and there is no public way yet to say how it will be used.
As a matter of fact, while the US government suggests that we use the Blockchain to eradicate piracy, the Chinese government has long decided to invest in quantum computing – starting with the Party’s 2013 plans. Chances are, in other words, that China will be leading the breakthrough of the third Internet revolution with the blockchain and its quantum security and communication layers.
In an era characterized by new paradigms of conquest and supremacy, these technologies will become an essential area of competition and commercial war, way beyond (and way more perverse) than the tariff war the traditional media often talk about. And their consequences, positive and negative, may be irreversible. To be continued…
>> Related Reading: HKMA Open API Framework: What it means for Hong Kong Banks
>> Related reading: Tech & Fintech Talks, our Asia-Pacific Tech & Fintech Insights.
Note: This Asia-Pacific Insight was originally published in its French version titled ‘Les blocs de données cryptées : des projets à la chaîne’ in LA CHINE HORS LES MURS #24 (20.7.2018).
Gilbert Réveillon | China Expert Contributor
CEO of Mobile LOOV, Gilbert Réveillon specializes in Digital Transformation, IoT, Big Data, Wearable Tech, Cyber Security, M2M, Virtual Social Networks, Virtual Assets & Cryptocurrencies, the blockchain, and ICOs. His expertise covers USA-Canada, UK-Europe, and China-Asia where he coaches several startups dealing with international business development where he has gained two « innovation awards » at the CES Las Vegas (2014 & 2015).
MBA graduated from HEC Montreal and as Associate Professor at the prestigious French Institut Mines-Telecom, Gilbert Réveillon has dealt with Entrepreneurship & Innovation Management within an ecosystem of 350 startups, 30 incubators & accelerators. He has occupied international commercial & marketing management positions in Canada (Royal Bank of Canada & Danone Group dealing with USA & Canadian Corporate Accounts) and in London (UK) with the most disruptive launch of Eurostar TGV High-Speed train. Following then as Managing Director of OSS & Virgin Group for executive aviation before returning back to France for Europcar International. Enhancing his great “industrial” expertise in CRM, Social CRM, and mode or payments for 10 years at LaSer (part of BNP Paribas) he is now actively dealing with ICT & Digital Economy startups (International Business Development, M&A and Investment funds).
Christophe Granier | China Expert Contributor
During his 37 years banking career, Christophe Granier was most of the time involved in asset finance activities, running specialized leasing subsidiaries of Soc Gen in seven countries including Japan, Turkey, and the Netherlands.
His main positions were Senior Country Officer of the Bank in Pakistan, Managing Director of Trilease International Ltd and Sogelease in Hong-Kong, before moving to Shanghai in early 2005 to establish the wholly-owned Soc Gen subsidiary specialized in leasing and renting activities.
Christophe Granier devoted more than 10 years of its career to Greater China. French Trade Counselor since 2000, he was also the Secretary-General of FTC sections in Hong Kong & China for 8 years. Coordinating the booklet on the International Strategies of French Groups in 2011, he took the lead of the worldwide inquiry on the China globalization “La Chine Hors Les Murs” in 2013, publishing the main study in 2014 then heading the Observatory for China Globalization.
Paul Clerc-renaud | China Expert Contributor
Paul Clerc-Renaud is a China and Asia-Pacific expert, contributor to The Asia-Pacific Circle’s insights. Based in Hong Kong since 1977, Paul is the Managing Director of Fargo Group, a supply chain management, manufacturing, and distribution specialist operating mostly in China, India, and Vietnam. He is currently Honorary President of the French Chamber of Commerce and Industry in Hong Kong. He is a former director of the Pasteur-HK University Research Center, Conseiller du Commerce Exterieur de la France (member of the board of the National Committee 2011-17), Hong Kong member of the Hong Kong France Business Council and investment promotion ambassador of Invest Hong Kong. He received the honour of Chevalier de l’Ordre National du Merite (Knight of the French National Order of Merit) and Officier de la Legion d’Honneur (Vice Chairman & Honorary Secretary of Legion d’Honneur Club Hong Kong Chapter).
Disclaimer: The views expressed are those of their author(s) only and do not reflect those of The Asia-Pacific Circle or of its editors unless otherwise stated.
More food for thought?
Are you looking for a big picture approach to APAC developments? From Financial Markets to trade diplomacy and geopolitics, The Asia-Pacific Circle connects the APAC dots in good business intelligence. [ Read all our APAC Insights ].
Looking for hints and tips about business trends? Our Asia-Pacific Business Insights closely look at Business developments in the APAC region. From regional investments to blockchain developments and China’s digital economy, our expert contributors connect the dots. [Read our Asia-Pacific Business Insights].
Financial Markets are predominant nowadays, hence our Asia-Pacific Insights closely look at financial developments in the APAC region. From financial regulation to Fintech policy and cryptocurrencies, the Circle’s Financial Market Insights connect the dots. [Read our Asia-Pacific Financial Markets Insights].
Pro-business policies or interventionism? Free trade or protectionism? What is the impact of China-US relations on global and APAC trade and business? Our APAC Trade Diplomacy insights also connect the dots! [Read our Asia-Pacific Trade Insights].
The Asia-Pacific Insights published on The Asia-Pacific Circle are copyrighted content and cannot be republished without the approbation of their author(s).