July 6th 2009 11:21 pm

THE STORY BEHIND THE CHINESE BROUHAHA: LOST IN TRANSLATION INDEED

Here’s the promised response from a representative of an international RMT site. I promised to keep his identity confidential. Anyway, I had asked him how he felt and what he did when the news about the supposed ban on gold farming broke out. Turns out our guy was as cool as a cucumber over the whole thing, though he does have something to say about the incident. A lot of words in fact, but worth the read .This should enlighten those among us who haven’t heard of "QQ coins" and how virtual currency makes the real world go round.

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Hi EGF,

The news stating "China Bans Gold Farming" raised a lot of eyebrows. However, thorough research showed the story got misinterpreted and exaggerated.

What’s the real story then? In the official website of the Ministry of Commerce of the People’s Republic of China,there is a piece of quoted news from Xinhuanet.com: "China bars use of virtual money for trading in real goods".  (Original news can be found on Xinhuanet.com. Original government announcement – in Chinese- can be found here .)

In the news on Xinhuanet, the use of QQ coin and WoW gold for real goods, such as mobile phones, digital cameras and MP4, is blamed, as well as the account theft activities in online gaming, and the use of virtual currency as gambling stakes. And since Xinhuanet is owned by the government, they never write pointless news. From this one, combined with my understanding of the situation in China, the point of this announcement is clear – it’s not about farming.

In the original announcement itself, the activity of purchase and trading of virtual currency are mentioned to be affected. Though very vague, the main target stated in the announcement are the companies that issues and trades virtual currencies. The main concerns of the announcement was about limiting the use of the virtual currency within the virtual service itself, and usage as real currency, to pay/buy real goods, or other services. Service providers are forced to shut down the virtual currency transferring functions if they don’t support trading. Virtual currencies are not allowed to be sold to minors. Activities such as gambling, lottery with the use/award of virtual currency, as well as account theft, private server and cheating programs using virtual currency as payment method, are to be punished.

And what about QQ coins? Issued by Tencent, the company that runs the largest IM service called "QQ" in China, the "QQ coin" has become a very common virtual currency in the Chinese cyberspace. The exchange rate of QQ coin is 0.9 (0.88*):1 against RMB, which is a lot more expensive than the currencies in other games. And with the widespread of the QQ service, this high-valued virtual currency has become well-known around China over the years. Tencent released the QQ coin, originally for using in their QQ avatar customizing service "QQ show", later extended the use to other QQ services, such as VIP membership, game time and other value-added services. People also figured out ways to transfer QQ coins between QQ accounts via several tricks (some got banned later due to the impact), which made the virtual currency able to circulate.

The high value of the coin and the transferrable characteristic made the born-soft currency hardened. Thus leading to a whole lot of real-world problems. If you do a search of "QQ coin" in Chinese language in Google CN, you’ll get tons of ways to get and trade it for things – needless to say, some are shady. The smart people of China has figured out various ways to steal QQ accounts, in orders to rip off the QQ coins in them if any; some of them managed to figure out a way of earning free QQ coins via the "QQ Games" service. Some with a thirst of gambling figured that with the help of the QQ coins, they won’t have to risk of getting caught by the police with stakes on their tables. All kinds of websites are holding events that rewards QQ coins instead of real cash, so they can avoid the tax checks. But, all the problems mentioned above are not as big as the real one – Tencent itself is making too much money from it, at no cost.

It took not very long until the government felt the threat from Tencent. Without proper rules, Tencent can inflate the RMB currency with their unlimited QQ coin production, and gather enormous amount of wealth, leaving RMB depreciated. Therefore, they started laying rules to Tencent on the QQ coin, starting from 2007, started with limiting transferring and so on. With the still-growing problems, the government never stopped tightening the rules since then. And the recent news was just another step in the progress. The reasons they listed such as account theft and gambling was just a pretext, and the real goal is to stop Tencent, the leakage in the Chinese currency system.

In another article on Xinhuanet, "The interpretation of the announcement ", the author mentioned several times about "the impact from virtual currency on the real world economy". It also pointed out that "the items earned thru online gaming don’t belong to the category of virtual currency" – Any farmers here? Time to cheer up. It is clear that the government wants to put a stop on companies like Tencent, who has the ability of inflating the RMB with the so-called virtual currency (but in fact it’s more like a pre-paid coupon), not the farmers who earn every penny by playing the games.

If you have other questions, let me know.

Sincerely,

Anonymous


2 Comments »

2 Responses to “THE STORY BEHIND THE CHINESE BROUHAHA: LOST IN TRANSLATION INDEED”

  1. Lestat de Lioncourt on 09 Jul 2009 at 1:19 pm #

    So true. Tencent can earn a lot by just producing unlimited QQ coins, valuable in cyberspace but in IRL, is worthless. They can make a lot of these coins as easy as typing the amount that they may desire on their software, sell it to the clueless people, and the big bucks continue to come in. It has no monetary control from the government so it is obviously a scamming style from the people behind it. Smart people. They made people think that it is as good as having cash in their wallets when the truth is they were already being robbed by these geniuses.

  2. wowrealcash on 19 Jul 2009 at 10:52 am #

    Paying real $$ for virtual items never made any sense to me.

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