China attempting to keep virtual and real economy separate

… by restricting purchases of real goods or money with virtual currencies.

Pre-paid cards are also considered virtual currency, but virtual items are not.

The new law states:
“The virtual currency, which is converted into real money at a certain exchange rate, will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services.”

Justifications offered:

– prevents illegalities

– prevents gambling

– prevents money laundering
– preemptive step towards preventing “virtual economy” having a negative influence on Chinese financial system

Affects:

– farmers selling virtual currency
– the definition of currency only covers medium currencies between real-money and items. This situation becomes a bit hazy though, because in some VW’s there is only one currency (earned through gameplay AND at the same time purchased with real money). In a way farmers selling virtual currency would still fall into the banned category, but the legistelation doesn’t seem to be targeted to “harmless” currencies such as WoW-gold, but towards currencies such as QQ-coins, which are widely used outside the Tencent QQ service.

– users doing business in VW’s (such as Second Life)

– Prevents gambling? Because you can not convert v-currency back to real money?
– Secondary market of pre-paid game cards
—> everything that includes exchanging virtual currency (as defined by the law) into real money or products.

Doesn’t affect:

– farmers selling virtual goods directly

– operator selling v-currency and v-goods

 

References:

http://english.mofcom.gov.cn/aarticle/newsrelease/commonnews/200906/20090606364208.html

http://www.virtualgoodsnews.com/2009/06/china-makes-first-move-to-regulate-virtual-currency.html

http://www.chinadaily.com.cn/bizchina/2009-06/27/content_8330180.htm

http://www.informationweek.com/news/internet/ebusiness/showArticle.jhtml?articleID=218101859

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Four Phases of Gold Farming

A somewhat downbeat assessment of the current state of gold farming emerges from a discussion with Dr Jack Qiu from the Chinese University of Hong Kong; who has been a regular observer of gold farming and other informal sector activities in China.  I report this as, and appreciate that it is, conversational rather than "hard" evidence.

Jack observes four phases of Chinese gold farming.

1. Globalisation (c.2003-c.2006)
The growth that we are all aware of, serving the global and regional games market

2. Localisation (c.2006-c.2007)
A very rapid expansion of gold farming serving the local Chinese market, spreading West from the Southern/Eastern coastal origins of gold farming.  In particular, related to Shanda’s Legend games.  At least some of the livelihoods created in this way were "playbourers" who received payouts from Shanda itself.

3. Partial Decline (c.2007-c.2008)
A severe decline of gold farms ("workshops") serving the local market for the Legend games; particularly due to a furore over the business model that Shanda had been using, and a notorious case of "gold slaves" in which students at a South China university were found to be forced by their professors to undertake unpaid "internships" if they wanted to pass their classes.  These involved gold farming either all night (male students) or all day (female students).  As evidence of the decline, Jack cites the example of  his own home city of Wuhan (popn. c.6m), which had some 4,000 "workshops" that grew up during the second phase to serve the local market but which now has few, if any.

4. Current State (c.2008-date)
Gold farms serving the global market remain as, too, do farms serving the local market.  The latter particularly represent a very "footloose" form of capitalism.  Footloose in the traditional sense of readily closing down operations in one place and opening up in another that has low wage and low rent costs and has recently obtaining decent broadband access.  And footloose in the sense of games.  The workshops will target a new or growing game, and try to find ways to make money out of it for a month or so.  If it succeeds, they stick with it for the moment. If not, they move on to the next game.

One further conclusion I noted from our conversation: there is a whole lot of data about gold farming that never makes it across the dual barriers of geography (it stays in China) and/or language (it stays in Chinese).