Tencent QQ, China’s most popular instant messaging service, has been a big interest of mine since I bumped into it in Shanghai. The service works similarly to e.g. MSN Messenger, except that it has a built-in virtual economy based on “QQ coins”. Pacific Epoch reports that the virtual currency has now raised legal concerns.
Users can buy QQ coins for a fixed price of one RMB per coin from Tencent. The coins can be used to pay for premium features, such as decorations for a chat avatar. Coins can also be transferred to other users. In addition to the official premium content offered by Tencent, third parties have begun accepting QQ coins as a method of payment for their services.
Services that I am aware of are gambling and “QQ Girls”, a service where one gets to have a private chat (a video conference?) with a lady in exchange for QQ coins. Both gambling and porn are illegal in China, so accepting virtual money as payment may be a way of avoiding the authorities.
Trading companies buy coins from parties that accumulate them, and sell the coins back to users for slightly less than Tencent’s official rate. Thanks to the official premium content, some coins are constantly drained from circulation, making sure new coins must always be bought from Tencent.
My impression was that Tencent did not take a hostile attitude towards this business ecosystem that had grown around its service. It is a symbiotic relationship: more third party services mean more coins are needed for circulation. It is potentially a big economy, too: QQ is estimated to have more than 150 million users.
Virtual Economy Research Network | 
If China can stop this then I will believe that they can really stop the gold farming communities for World of Warcraft.
Maybe they can just regulate the exchange rates to avoid exploiting the system.
People trade real to virtual currency because they enjoy it. I also think it creates jobs just like the gold farmers. Check out how it helped a student.
http://www.linkgeneral.com/articles.asp?articleid=52974