Young Chinese consumers are increasingly embracing digitization, meaning that any brand interested in tapping their spending power should increase activity on Chinese social media platforms and consider collaborations that include the issuing of digital collectibles (the China-market counterpart of NFTs). For brands looking to build hype online and tap the spending power of young Chinese consumers, here are five things that brands should keep in mind before launching digital collaborations in China:

1. Don’t confuse China’s digital collectibles with NFTs

To safeguard what Beijing authorities call “currency sovereignty,” the People’s Republic of China (PRC) enacted a phased but strict nationwide crackdown on cryptocurrency trading and mining over the past few years. The Chinese government has cautioned that NFTs cannot be used for de facto cryptocurrency transactions and that platforms selling NFTs must receive relevant licenses that are difficult to acquire. Therefore, Chinese versions are referred to as “digital collectibles” (数字藏品 ) by the platforms to disassociate them from NFTs, and resale is strictly prohibited. 

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2. Digital collectibles in China flourish despite tight regulations

China’s digital collectibles market is growing rapidly. In 2021, China’s digital collectibles platforms issued around 4.6 million collectibles with a market value of around 150 million yuan ($22.4 million). Some have estimated that the market size could grow at a rate of 150 percent and reach 29.5 billion yuan ($4.6 billion) by 2026. As of June 15, 2022, China had more than 500 digital collectible platforms, compared to only around 100 in February of the same year. On the popular lifestyle app Xiaohongshu, searches for posts related to digital collectibles increased by 1,228 percent year-on-year in 2021, while the number of posts related to the keyword “NFT” rose 159-fold.

3. Prioritize hype-building over sales revenue

The absence of a secondary trading market means that there is a clear ceiling to the revenue from selling a specific number of collectibles. However, they can generate considerable discussion and enthusiasm online. This is especially true for emerging IPs that want to quickly increase their brand recognition. For instance, the hashtag for domestic art toy brand Fatko’s digital collectibles collaboration with Chinese sportswear brand 361 Degrees racked up 41.4 million cumulative views on Weibo.

Fatko and 361 Degrees teamed up on a physical and digital collection. Photo: 361 Degrees’ Weibo

4. Always include a physical component to digital collectibles

A physical component of digital collectibles can significantly boost consumer interactions. If the collectibles are issued alone, consumers might rush to purchase them on online platforms but quickly move on to the next highly anticipated release. By comparison, requiring consumers to purchase physical items or showcase their previous purchases can attract consumers to visit stores and sustain the online discourse. Additionally, physical products present the opportunity to introduce overseas NFTs into the China market.

5. Brands should not state that collectibles have investment or transactional values   

Given China’s strict digital collectibles regulations, brands should not risk their collectibles being seen as having great transactional values. Instead, brands should take pains to emphasize that their collectibles are only rewards to consumers who purchase certain products and that they prohibit their resales. 

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