China Report: A deep dive into China's large-scale VR

In Q3 of last year, I provided a brief overview of China's large-scale VR market (China’s ‘Big-space VR’ Boom). For this edition, I will explore this topic further by interviewing Pengpeng (Jeremy) Li — Unity China XR Product Technical Director and the founder of Coffee&XR Studio, who shared valuable insights into the Large-scale VR ecosystem in China and his ambitions to bring his latest project to London. Here are the key takeaways, with the full write-up below:

• Blending folklore and tech: Jeremy's latest project New Peach Blossom Spring, adapted from a classic Chinese folklore, is a 40-minute large-scale VR experience featuring unique interactions and multisensory elements.

• Booming Chinese VR market: China’s large-scale VR market is expanding rapidly, with over 100 new projects launched in 2024. Profitability varies, and competition is rising among a diverse set of players.

• Key trends driving growth: Major trends include AI integration, advanced tracking tech, cultural IP expansion, and increasing consumer demand for premium location-based entertainment (LBE) experiences.

• Tourism and licensing models lead: Two business models dominate: tourism partnerships that integrate VR at cultural sites using revenue-sharing; and content licensing to offline VR venues via usage-based fees.

• Targeting London’s global appeal: Jeremy plans to bring the project to London, leveraging its mature entertainment market and aiming to attract both local audiences and international visitors, including overseas Chinese students.

• Future of large-scale VR: The sector is expected to evolve with lighter headsets, cloud rendering, and broader content applications beyond just gaming or storytelling.

Could you share your experience working in XR? Briefly introduce Coffee&XR and your latest project?

J: My XR journey began in 2017. I later joined Unity focusing on XR technology research. In 2021, I established the Coffee&XR community and in late 2024,  I founded our Coffee&XR Studio.

Coffee&XR specialises in producing immersive experiences by integrating Unity, cutting-edge hardware, AI, and digital human technologies. Our team comprises industry veterans with backgrounds from leading technology companies including Unity, Ford, Huawei, Microsoft, and Google.

Our latest project is a large-scale VR experience adapted from the classic Chinese folklore "Peach Blossom Spring" by Tao Yuanming, incorporating Qin Opera elements. What distinguishes this project is our enhanced immersion through multisensory hardware integration—specifically scent and wind effect systems that complement the visual experience.

What inspired you to focus on multiplayer VR experiences, especially projects based on Chinese folk tales?

J: Multiplayer VR creates richer social interaction and more dynamic gameplay experiences. There's nothing quite like teammates' screams during a zombie VR game to enhance the entertainment value! After joining Unity, I continued to focus on Unity's Universal Render Pipeline, XR interaction, and multiplayer networking technologies. From a technical perspective, VR multiplayer solutions are now quite mature, allowing developers like us to focus more on enhancing the content and user experience.

Chinese culture offers countless classic stories that come with inherent recognition and cultural resonance. These stories—from "Peach Blossom Spring" to "Mulan"—already represent accessible, culturally-rich IP. I believe the fusion of these ancient narratives with VR technology naturally creates a compelling experience.

What platforms and tools do you mainly use to develop this project? What is your timeframe?

J: Our hardware platform of choice is the HTC Focus 3. Since our core members are from Unity, Unity Engine becomes our primary development environment. For team collaboration, we used Unity Plastic, which particularly benefits our visual-focused features through its artist-friendly workflow.

We started designing the storyline in September 2024. As our first self-developed project, we encountered various technical and creative challenges throughout the development cycle. The complete process—from initial concept to final deployment—spanned around 6 months.

What distinguishes your latest project from other LBE large-scale VR exhibitions? How does it enhance user experience?

J: Our primary innovation lies in the content, as we are the first to combine the Chinese classic story "Peach Blossom Spring" with Qin Opera. We are bringing new life to traditional Chinese culture through VR technology. 

Additionally, we've incorporated advanced scent systems—the fragrance of lotus flowers as the boat glides through the pond, peach blossoms when passing through the garden, and moss when traversing caves. We've also added wind and rain effects; you'll feel breezes on your face while flying on peach blossoms and water splashing when passing waterfalls. These multi-sensory feedbacks create more immersion.

What is the ecosystem like for China's large-scale VR market? What key trends are driving the industry?

J: The market is growing exponentially across content creation, distribution, and operations. While over 100 new large-scale VR projects launched in 2024, the market struggles with content homogeneity currently. While standout projects like "Horizon of Khufu" and "Sanxingdui Encounter" have seen significant profits, many only achieve moderate revenue or barely break even. Competition is intensifying with diverse entrants including film companies, IP holders, game developers, and tech firms.

Three key trends are driving the industry:

• Technological innovation: AI is being used to generate virtual scenes, characters, and voice interactions. Advanced positioning systems like Lighthouse enable precise tracking in large spaces.

• Content and IP expansion: Chinese cultural IPs from Qin and Tang dynasties are increasingly being developed into VR experiences, with cross-domain collaborations from film, animation, and gaming sectors..

• Evolving consumer demand: There's an increasing appetite for premium immersive social interactions. The cultural tourism sector is incorporating LBE VR into site attractions.

You plan to bring your project to London. What specific opportunities are you seeking? What are your visions?

J: London presents a mature entertainment market receptive to innovation. Following Meetspace VR's success at Wembley, we believe large-scale VR can attract both local and international audiences. Our Chinese cultural content will diversify the market and appeal particularly to overseas Chinese students.

I also aim to establish partnerships with cultural institutions like the British Museum on VR projects, and collaborate with UK’s tech companies and game developers to jointly develop new VR experiences.

My vision unfolds in stages: establishing brand recognition and achieving break-even within the first 12 months, expanding to capture 10-15% market share within 1-2 years, and ultimately becoming an industry leader in London's large-scale VR market within 3-5 years.

How do you see the development of large-scale VR in the next few years?

J: I think technically, we'll see lighter, higher-resolution headsets with more precise tracking systems, and cloud rendering technology will reduce local hardware dependency. Content will diversify beyond gaming into education, training, and artistic creation, with AI-driven personalisation and enhanced interaction through facial recognition and physiological monitoring. The market will expand to smaller cities as hardware costs decrease. I also hope to see that industry standardisation will establish higher quality standards and more safety regulations.