China’s Tencent Holdings Launches Metaverse Division

China’s Tencent Holdings has formed an “extended reality” (XR) division to tap into the burgeoning metaverse.

As Reuters reported Monday (June 27), the new unit is responsible for creating Tencent’s XR business regarding software and hardware. Sources at the company said the unit will be led by Li Shen, chief technology officer at Tencent Games Global, and will be a part of the tech giant’s Interactive Entertainment business group.

Related: ByteDance, Tencent, Alibaba Invest in China’s Regulated Metaverse

The sources told Reuters the unit would grow to have more than 300 members, coming at a time when Tencent has been cutting costs and easing back on hiring. They added that the unit has been in existence since earlier this year, but has operated under the radar.

XR is a term that refers to the technologies that form the backbone of the metaverse, namely augmented reality (AR) and virtual reality (VR).

Tencent, Alibaba, Tiktok owner Bytedance and other major Chinese tech companies began upping their investments in the metaverse earlier this year.

“Metaverse is the future of the social network,” Winston Ma, managing partner at CloudTree Ventures, said in an interview with CNBC in February.

“All China’s tech giants have to embrace it to find new ways to engage the youngest generation of internet users, which is critical at the time when their business models on smartphones and mobile internet are matured,” Ma said.

Read more: $8T Metaverse Market Potential May Hinge on Regulation in China

And as PYMNTS wrote, the market potential for the metaverse could hinge on China. In February, investment bank Morgan Stanley told investors that the country’s market for the metaverse could dominate the sector at $8 trillion.

However, a lot is riding on how the sector is regulated. Meta Platforms, the parent company of Facebook, and Microsoft Corp. have invested heavily in the metaverse concept, while China’s government has shown more caution amid tighter regulations.

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