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Virtual Currency Threatens Chinese Economy

by Chris Faylor, Jun 19, 2008 10:08am PDT
Related Topics – PC

Scattered reports indicate that an online currency, known as the QQ coin, may be having an adverse effect on the Chinese economy and official state currency.

Part of Tencent's popular instant messaging client QQ, which is said to have over 317.9 million active accounts, each QQ coin sells for roughly one yuan and is supposed to be used to purchase virtual items for online avatars and pets.

However, the massive popularity of the QQ chat program seems to have expanded the worth of the QQ coin beyond its original scope. In 2007, Wall Street Journal reported that retailers were accepting the QQ coin in return for real-world merchandise, and that so-called "QQ Girls" were accepting the coins as payment for intimate private chats.

The unexpected uses began to inflate its real-world worth, and rumors arose that some were laundering the non-government regulated commodity for profit. In March 2007, the Journal claimed the real-world value of the QQ coin had risen 70% "in recent weeks."

Allegations have also surfaced, via a former Tencent employee, that the company engages in ethically and legally questionable activities to ensure it meets its quarterly targets.

In a now-removed Donews article rehosted at Digital Watch, ex-QQ Pets product manager Gao Shan suggested that, in times of monetary need, Tencent may intentionally make online pets "sick," forcing "quality customers" to spend QQ Coins on a virtual vet visit and virtual medicine.

While news on the QQ Coin has been relatively slow since the story broke in early 2007, China Trends claims this is a result of a news blackout by the Chinese government. "Our sources suggest that QQ Coin continues to appreciate, which lends credence to the news blackout," read an update issued in March 2008.

"The central bank has begun to study the issue," People's Bank of China spokesman Li Chao told People's Daily Online in January 2007. "We will firmly crack down on virtual money if it is used to launder money."

However, Tencent claims that the QQ coin is not a currency, but rather a regular commodity. "The fact that the QQ coins cannot be officially changed back into money makes them less than harmful to the financial market," Tencent assistant PR manager Song Yang explained to Shanghai Daily, according to Xinhua.

"We agree that we should prevent online virtual money from being used illegally, such as for money-laundering. But QQ Coins are not anything like that," a Tencent spokesperson later told the Wall Street Journal.

Thanks to BoingBoing and Kasier for the initial Digital Watch link.




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