Latest News with Tag 'China'

According to today's New York Times:

"HANGHAI — The buying and selling of the make-believe currencies used in online gaming has become so widespread that Chinese authorities fear it will affect the real economy. To quell that threat, those authorities said on Tuesday that they had issued new regulations aimed at restricting the trade and use of virtual money.

....Last year, nearly $2 billion in virtual currency was traded in China, according to the China Internet Network Information Center. Some experts say they believe there is a much larger underground economy in the virtual world.

......On Tuesday, China said that new regulations would restrict the trading and use of virtual money, and that virtual currencies would be banned from being exchanged for goods."

The official statement can be found at China's Ministry of Commerce.

The problem China is facing is that users have started to take virtual currency such as the widely popular QQ coins and exchanged them for real goods and services. This in effect bypasses the government's highly regulated currency which is subsequently seen as a threat to government control.

News from China last week brings possible vast legal ramifications:

“Four young men were convicted of and sentenced for theft of virtual facilities and coins of online games, according to sources with a local court in Shenyang, capital of northeast China’s Liaoning Province.

On Oct. 22, 2008, Wang and his three friends beat, coerced and forced “Shenyang fellow” to transfer to 100,000 yuan worth of QQ coins, a kind of virtual money, and a large amount of virtual facilities to Wang.

Wang Xiaoquan received three years’ imprisonment and his three accomplices received reprieved sentences, each of the four was fined 5,000 yuan (about 735.3 U.S. dollars), according to a verdict statement of the People’s Court of Dongling District on Saturday.”

The virtual currency was worth about $14,700 USD and comes from the Chinese web portal Tencent with over 300 million active users. It is important to note that since the virtual QQ currency once purchased or won can not be converted back into cash the traditional argument for it having value was not deployed. Instead the court found that:

“…although no law has acknowledged legitimacy of the virtual property, game players have paid time and real money to accumulate their virtual property, which should be protected by the law.”

As more and more online companies use virtual currency to generate revenues, it will be interesting to see what happens when such cases go to U.S courts and what ramifications it will have on secondary markets.

On a side note QQ made it in the WSJ some time back because players were using it as a real alternative to China’s heavily regulated currency.

There has been a bit of new data about WoW Gold farming recently and Professor Richard Heeks has provided some updates over at VERN. Some of the key takeaways:

• Estimates of 400,000 people working in China on gold farming/trading are seen as very realistic, and the number could be 500,000 up to 1,000,000 (with *possible* total Chinese RMT turnover of up to $10 billion a year...which seemed way too high for us)
  
• The system is setup so that there are brokers (e.g: Swagvault) who sell to American consumers and gold farm shops
• It has been estimated that there are 60,000 "brokers" (this number also seemed a bit high)
• Gold farms employ those with just high-school diplomas or below, and so the farms are put where they can get space cheaply; typically some way outside a city or in smaller towns/cities.
• The gold farms Anthony saw were full of young guys aged around 18-20 with beers and cigarettes, hanging out playing games and having a good time. They realize it's not a long-term occupation but they also appreciate that they are part of something that is rather new and different. His estimate is that they'll stay for maybe 1-2 years before moving on to another kind of job.

Is gold farming the Chinese equivalent of the  American Teenagers Fast Food Summer Job?

The British newspaper The Guardian recently ran an article about Chinese Gold Farmers. The following are the highlights:

Workers can expect to earn between £80-£120 [$110-180]a month which, given the long hours and night shifts, can amount to as little as 30p an hour. After completing his shift, Li is given a basic meal of rice, meat and vegetables and falls into a bunk bed in a room that eight other gold farmers share. His wages may be low, but food and accommodation are included.

These virtual industries sound surreal, but they are fast entering the mainstream. According to a report by Richard Heeks at Manchester University, an estimated 400,000 Asian workers are now employed in gold farming in a trade worth up to £700m a year. With so many gamers now online, these industries are estimated to have a consumer base of five million to 10 million, and numbers are expected to grow with widening internet access.

These figures mean big business. The gold farming industry may be about playing games, but these companies take their work seriously. At Wow7gold, a sophisticated division of labour splits workers into different departments, including production, sales, advertising and research. What's interesting about this "virtual division of labour" is that traditional concepts of "men's work" and "women's work" still apply. While young, largely unskilled "playbourers" such as Li spend their days toiling in the virtual field, highly skilled female graduates receive higher salaries working as customer service operators.

Eva Yuan is one such operator. A 26-year-old graduate who speaks three languages, she has been working in the white-collar departments of Wow7gold for more than a year..After leaving university, Yuan was unable to find employment in the "real" economy. Now, the £250 [$350] she makes every month at Wow7gold allows her - with a bit of help from her parents - to support her one-year-old son.

The average income in China is $2,025 ($168/month) according to the world bank which comes within the range of the gold farmers in the article (who also get free room & board, meals and most importantly an office job with air conditioning). This doesn't mean that gold farmers live in ideal circumstances, but it's important when making judgments to make comparisons on a relative basis.

According to China Daily News:

"The Shanghai government is considering the launch of online game service standards, according to which Chinese online game operators need to provide formal notification to players when they decide to close their usernames and remove their identification within the games.

The standards say that online game operators should strictly observe the regulations of relevant supervision departments and keep the records of the users to support the investigation of these departments when necessary.

In addition, if the users need to provide proof for their online game identifications to administrative organizations, judiciary or monitoring organizations, the operators should provide relevant identification and virtual property certifications to the extent permitted by technical conditions."

Developer Raph Koster has talked about a player bill of rights before, but this seems to be on a completely different level. However, like China's other "bills" and "bans" and "regulation" I doubt that this will change anything; but it's a start. (And no there are no gold farmer unions yet; although there are some "circles" and semi-"cartels")

Only two years ago China "strictly forbid" players from making money trading virtual currencies. The statement wasn't enforced and gold farming continued to rise in the country.

Now the Financial Times has announced that China has announced a 20% tax on money made from trading virtual currencies.

Some interesting lines from the article:

• "Trade in virtual items – ranging from “gold” coins to magic swords and in-game property rights – is estimated to be worth more than Rmb10bn ($1.45bn, €1.15bn, £900m) a year in China alone, according to consultancy iResearch."
• "Beijing tax officials declined to explain how they would implement the vaguely worded ruling, with local media saying detailed regulations could be announced in the coming days. However, Chinese analysts and games players suggested that the authorities’ attempt to tax the virtual currency trade would fare no better than the previous effort to ban it."
  

As we have said in the past, prohibition rarely works and gaming companies and governments would be much better suited to enforce regulation and taxation than prohibition of this emerging market.

What do you think the future of virtual game markets will be? Prohibition? Free Markets/Trade? Regulation? Let us know.