Since its early launch stages, we have received inquiries from oversea NFT projects willing to attract Chinese investors. The reason for that is, despite the local NFT ecosystem is still not finalized yet, the Chinese investors have been among the first to invest and explore NFT projects in foreign market place. In this article, we will provide an overview about what are NFTs, the Chinese NFTs market and how to market your oversea NFT in China.
- In 2021, the total estimated revenue for the Chinese NFT market was around 300 million RMB.
- The NFT project Phanta Bear launched by Jay Chou sold out within 40 minutes in January 2022, generating approximately 10 million US dollars.
- Chinese NFT market is expected to grow at about 150% in the next five years, reaching 29.52 billion yuan.
What are NFTs?
Traditionally, visual artists create a ‘Certificate of Authenticity’ to accompany any painting, sculpture, or print that they sell or intend to sell. Why? So that an owner can prove that they have the right to possess a given artwork, and that the artwork is genuine. The problem with certificates of authenticity is that they may easily be forged, they may be lost, and there is no formal tracking system to which they belong. Except for some of the most expensive artworks, there’s rarely anyone keeping an eye on an artwork’s trade history.
Imagine if there was a giant ledger, and in it, the details of all certificates of authenticity were recorded, along with the details of the artworks to which they pertain, and each time an artwork changed ownership, the ledger was updated. Imagine that this ledger was not maintained by one central authority but was cross-checked by thousands upon thousands. And, that changes to any given entry could only be made by the individual who these thousands verified to possess ownership.
Blockchains are digital versions of such ledgers. Consider the possibility of entries for anything that can be digitally identified – given a digital signature – such as a music, a photo, a film, or even a digital artwork (of which no physical copies have ever been generated). Tokens are the names for these blockchain entries. They are completely unique, difficult to fabricate, and are regularly cross-checked by machines dedicated to maintaining blockchains and confirming transactions all across the world. In a nutshell, they’re ‘non-fungible.’ Non-fungible tokens: NFTs.
NFT supporters think that the fact that NFT artworks have been auctioned off as works of art at world-famous auction houses proves that NFT’s creative worth is recognized by the mainstream art world. On the other side, it is nothing more than a new sort of hype in the perspective of some ordinary investors who have witnessed the bursting of the cryptocurrency bubble.
However, things are totally different in the Chinese market. How do Chinese consumers see NFTs? What’s the government attitude among trading NFTs? Why and how can you market your brand to target the Chinese market? We are going to tell you more in the following paragraphs.
China NFT Market Introduction
The popularity of the NFT market in China is booming. For example, NFTCN, one of the most popular NFT art marketplaces in China, is currently working with over 80,000 artists, who you can find on this decentralized digital asset trading platform. Another example would be that in 2021, the estimated annual revenue for Ant Chain is around 90 million. And the total estimated revenue for the Chinese NFT market is around 300 million in that year (Page 19).
Most importantly, there is the rise of NFT projects in China. According to Sun Rong, Director of Cooperation, Strategy Department, Digital Technology Business Group of Ant Group, NFT is not only an innovative business model, but it also caters to the strong demand of contemporary young people for cultural consumption. About 10 million young consumers are paying attention to or buying it. Since the beginning of 2022, the Baidu index of digital collections has shown a fast growth trend.
Baidu Searches of “Digital Collections (NFTs)”
In addition, NFT is gaining a lot of attention in the Chinese entertainment industry. The popular Chinese NFT project Phanta Bear was launched by Taiwanese singer Jay Chou’s brand Phantaci and digital entertainment platform Ezek. The Chinese NFT project Phanta Bear sold out within 40 minutes of its launch, generating approximately 10 million US dollars in revenue (Page 15).
Jay Chou and his Phanta Bear
Leading technology companies continue to invest heavily in this new space and hope for its success. Also, the Chinese government supports the booming NFT market by highlighting the development of blockchain technology as one of the key foci of its 14th Five Year Plan.
Looking at how people search for NFT globally in 2021, China is the top country for NFT searches, according to data obtained by Google Trends. Chinese NFT is expected to grow at about 150% in the next five years. By 2026, China’s NFT market is expected to reach 29.52 billion yuan (page 19). This demonstrates the enormous potential for future growth and development, implying that many opportunities remain untapped or underutilized.
Chinese NFT Platforms
The largest NFT trading platform in China is NFTCN (Bigverse) as mentioned above. It completed its inner side and officially launched on May 20, 2021. NFTCN is the only trading platform in China that uses the Ethereum public chain. It has a full 95% reduction in transaction fee of RMB 33, which is one 20th of OpenSea. A large number of users enter NFTCN because of the extremely low transaction cost. The large number of users and extremely low transaction costs have given rise to an active trading ecosystem, which provides good circulation for digital artworks. This active ecology eventually pushed NFT China to the number one ranking in terms of total domestic turnover. The thing to note is that, for artists with art studios or organizations, there is no limit to the number of releases on the platform. For individual applicants, there is a maximum of 20 copies of their works to be uploaded. The platform currently supports various distribution modes such as blind box distribution, auction, and pricing. In addition to the marketplaces on its own platform, NFT China will also synchronize work to several of the largest overseas marketplaces such as OpenSea and Rarible to solve the liquidity problem. And this platform only supports RMB trading.
The other two main NFT players in China are Jingtan (Chinese: 鲸探, English: Topnod; Alibaba Group) and Huanhe (Chinese: 幻核 Translation: Phantom Core; Tencent). Unlike NFTCN, these two platforms use internal private chains rather than Ethernet public chains. As of December 28, 2021, there were 2,668,722 digital collections with issue volume greater than 1 on Jingtan, with a total issue market value of more than RMB 51 million and an average selling price of approximately RMB19.15. As of December 30, 2021, there were 20,450 digital collections with issue volume greater than 1 on Huanhe, of which 15,130 were priced and sold and 5,326 were issued for public welfare activities and other promotional activities, with an issue volume market value of over RMB 1.5 million and an average selling price of approximately RMB102.14. We are going to discuss how they are different from other overseas platforms or NFTCN in detail in the next part.
How is the NFT market in China different
To begin with, blockchains in the rest of the globe are decentralised, meaning that there are no single decision-making authorities in charge of their direction or upkeep, but rather groups of participants. Even non-government blockchains in China, such as Alibaba’s Jingtan or Tencent’s Huanhe, are regulated and contributed to by a small group of people.
On June 23, 2021, Alibaba launched the first NFT trading skins Dunhuang Flying Sky and Nine-Colored Deer in China, with a limited edition of 16,000 copies worldwide. The NFTs were issued on Ant Chain and had a unique code exclusive to Ant Chain. The two skins were instantly snatched up on the day of release. The fever was unprecedented. On September 23, the domestic NFT craze had changed. A user with the ID Street Dance Geek in the auction platform released the Asian Games digital torch related. The auction price was set at $3.25 million. A month later, on October 23, the word ”NFT” disappeared from Alipay’s mini program Ant Fan Grain and the inner page of Tencent’s NFT distribution platform HuanHe . However, it was replaced by “Digital Collection”. Ant Chain defines “digital collectibles” as “virtual digital commodities” and Tencent Phantom Core defines “digital collectibles” as “virtual proof of interests”. “Both parties emphasize that they do not have the attribute of “virtual currency”. At the same time, both sides emphasized that as “virtual goods”, digital collectibles, once exchanged, do not support returns.
The reason for the two organizations to adjust their behavior is that NFTs may not be traded for cryptocurrency. China has a strict ban on owning or trading cryptocurrency (with the exception of the digital yuan, which for all intents and purposes behaves like fiat); purchases and sales are made with fiat currency only. This is significant, given that most of the world’s NFT marketplaces process the majority of their transactions using cryptocurrencies. The Chinese government support the NFT market in the following ways:
- It is developing its own state-backed blockchain (the Blockchain Services Network, or BSN), which will enable for NFTs that are fully connected with the Chinese yuan and can be utilized by both government and private businesses and individuals.
- It is taking proactive steps to establish a regulated NFT market in which speculative trading via secondary markets is either prohibited or limited.
- It’s combining existing IP protections over creative work – most notably, copyright – with NFT-linked content. This means that only creative content that does not infringe copyright is eligible for placement in any Chinese NFT marketplace.
Different platforms in China respond to the policies in different ways. Jingtan users can transfer their digital collections (NFTs) after holding them for more than 180 days. The user can only make a second transfer after 2 years of ownership. By limiting the circulation, it can greatly reduce the risk of speculation.
Some platforms, represented by Huanhe, issue digital collections (NFTs) with strong IP traffic, allowing consumers to buy and collect them. However, Tencent’s private chain is not allowed to conduct secondary transactions. This makes Huanhe lack a market-based price discovery mechanism, and therefore cannot effectively incentivize the production or creation side. Therefore, it is in contact with a number of national trading platforms to try to have the national platform undertake secondary transactions.
Based on the above, it can be found that the market for NFTs in China is restricted. This is because the government is against cryptocurrencies, which would encourage speculation and could lead to money laundering or other criminal activity. However, the potential purchasing power of the market is not fully unleashed because it is not legal to trade NFTs freely. Therefore attracting Chinese consumers to the international trading platform may be something that many individual designers and companies would like to do.
Why brands are creating NFTs
Inspire consumer’s participation.
NFTs are both collectible and scarce. When brands tie their products to NFTs, consumer engagement will be released to the fullest. According to a survey conducted by The Harris Poll and R&CPMK, 30% of consumers explicitly stated that they “would like to receive NFTs as a gift with their purchase”. There are many ways to motivate consumers. For example, the NFT is frequently used by merchants to motivate the earliest purchasers or those who buy the most. Besides the two most common methods to encourage purchasing, brands can also take rewarding top numbers of forwarding, the longest times staying in the live streaming room, or other new methods into consideration.
Build emotional connection with consumers.
The research also shows that 38% of consumers who are aware of NFTs say they prefer them to physical souvenirs to commemorate the fun times they get from events. Consumers want some way to commemorate important holidays or highlight moments from major events. When NFTs capture, share and touch those moments without limits, brands can strengthen their emotional connection with consumers. Brands can market themselves to gain consumer attention and loyalty by establishing brand anniversaries or other festival-related NFTs.
Get connected with the young generation.
Relatively few Americans – roughly one out of 10 – invested in NFTs in early 2021, although most investors were found among millennial men. Indeed, around 22 percent of millennials indicated in an online survey held in March 2021 they were currently invested in NFTs. Although the Chinese NFT market is relatively different from the overseas market. The age group also focuses on millennials and Gen Z. Brands can not only attract young consumers with NFT marketing, but also create a young brand image. This is because it shows that the brand is at the forefront of trends and has a common language with Generation Z and young millennials.
Diversify the product line and generate extra profit from NFTs.
While most international brands currently choose to donate the proceeds of NFT sales to charity, this behavior can be interpreted as brands testing the waters of NFT industrialization. This includes the possibility that brands will sell virtual main products directly in the future, or use the brand’s unique assets or strengths to create NFTs. For some Chinese domestic brands who get the permission of issuing NFTs, they can sell the NFTs to fans of their own brand. These fans consider virtual products to be collectible and are usually willing to pay a higher price than other normal consumers. Also, by interacting with NFTs or even using NFTs to gamify their brand can make the brand more diverse.
How to Market your oversea NFT in China?
All digital marketing in China starts with a China based, China-registered website. This is important because of two reasons. First, many other marketing services and tools, such as Baidu paid ads, require having a Chinese website first. Second, simply porting or translating an international site is not working in the digital marketing environment in China. Chinese net users interact differently than those elsewhere, so localization is crucial to maximum success.
Chinese Social Media
What is the most effective method of promoting virtual collectibles? Hype. What is the best way to create hype in China? It’s a good idea to start with Weibo, Little Red Book, and WeChat. These apps not only give brands access to large, active user bases, but they also allow them to communicate and establish a true online personality. It’s important to proceed with caution in this situation. Controversy and taboo subjects are easy to come across, so a local expert is essential.
NFT brands official accounts on LRB (First Two)/ NFT Daily official account on WeChat (Third)
Online Press releases
In the past year, China has seen a surge in the number of NFT-focused media and communities as mentioned. On WeChat, there are a slew of official profiles and group conversations, as well as influencers on other social media platforms. Good agencies will have connections to these highly powerful people and will be able to generate press attention by writing press releases in a way that piques their interest.
Chinese NFT Influencers
Marketers all across the world are familiar with this tried-and-true method. Enlist the help of a KOL, or piggy-back on a product launch, to insert vouchers, coupons or links to upcoming NFT releases within otherwise unrelated online content. These are the most efficient ways to get more attention for your NFT program.
KOL accounts promoting digital collections/ outfits on LRB/ Weibo
Online Reputation Management
The Chinese NFT community is quite active in forums. Creating positive material in the form of discussions/topics about your NFT project is one of the best strategies to be noticed. This will increase visibility as well as build a layer of positive material that people will associate with your NFT.
Marketing your NFT to the Chinese investors can be intimidating. We need to keep in mind that this community has pioneering NFT investment since its early stages and is highly informed and aware. It’s crucial to utilize their awareness to your advantage by setting up proper marketing and communication channels to properly introduce your NFT project.
Sekkei Studio is Digital Marketing Agency that spent 13 years helping foreign and domestic brands/ governments in China. We are well-versed in the Chinese Digital Ecosystem and familiar with its ins and outs. Let us know about your NFT project in China, and we’ll be happy to assist you in creating the ideal solution.