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.

>> Related reading: Tech & Fintech Talks, our Asia-Pacific Tech & Fintech Insights.

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…

This article was originally published as ‘Blockchain et Transformation Quantique: Nouveaux Axes de Conquete pour la Chine’ in La Lettre de La Chine Hors Les Murs, #24, by the French External Trade Advisors (Comite National des Conseillers du Commerce Exterieur).