In China' s online world, weak payment systems remain perhaps the greatest obstacle to overall sector growth. With a banking system slow to reform, heavy restrictions on PayPal-like online payment platforms, and little credit card usage among China' s online population, virtual currencies have quickly found a niche. These currencies cover a wide range of uses, from Q Coins, the standard payment for countless virtual goods and services on Tencent' s QQ.com, to the gold and credits in the virtual economies of China' s popular online gaming sector.

Virtual Currencies in China is the first in-depth look at the virtual currency phenomenon in China. In it we provide a comprehensive overview of all key companies and currencies. We examine a number of recent reports - virtual currencies threatening China' s official currency, "gold farms" producing and selling virtual gold for real cash, virtual money laundering, and rumors of major government restrictions in the near future - and separate fact from fiction. Looking ahead, we forecast the potential for growth in virtual currencies and which companies (and currencies) will come out on top.

• Instant messaging and portal-based virtual currency issuers: Tencent (Q Coins), Sina (U Coins), NetEase (POPO Gold Coins), and Baidu (Baidu Coins)
• Online game-based virtual currency issuers: Blizzard Entertainment/The9 (World of Warcraft), Netease (Fantasy Westward Journey), Shanda (Woool, Legend of Mir II), and others
• Virtual currency users: QQ users, online gamers, gold farmers, and virtual currency traders
• Virtual currency exchange sites: Taobao, 5173.com, IGE, eBay China, and others
• Virtual currency regulators: China Banking Regulatory Commission, Ministries of Culture and Commerce, others

• How strong is user demand for virtual currencies in China?
• How will virtual currencies influence China' s economy?
• How well can virtual currencies compete with other online payment systems in China?
• How will today' s virtual currencies in China fare in the long run?
• How will China' s government regulate virtual currencies?
• To what extent will virtual currencies become conduits for illegal activities in China?
• What role will China' s virtual currencies play globally?

1 Introduction

• 1.1 Report scope
• 1.2 What are virtual currencies?
• 1.3 Why virtual currencies matter

2 Virtual Currencies and Their Issuers in China

• 2.1 How virtual currencies are created
• 2.2 Instant messaging and portal-based virtual currencies
  • 2.2.1 Tencent' s QQ phenomenon: avatars, Q Coins, and Q Pets
  • 2.2.2 Sina U-Coins, NetEase POPO Coins, and Baidu Coins
• 2.3 Game-based virtual currencies
  • 2.3.1 Online gaming currencies traded in China
  • 2.3.2 Gold farming

3 Virtual Currency Trade in China

• 3.1 Real money trades
  • 3.1.1 Q Coins and other portal-based virtual currencies
  • 3.1.2 World of Warcraft Gold and other online gaming currencies
• 3.2 Virtual currency trading companies
  • 3.2.1 Chinese trading companies: Taobao and 5173.com
  • 3.2.2 International trading companies: IGE and eBay
• 3.3 Virtual currency exchange rates
• 3.4 Government regulation
  • 3.4.1 Key regulating bodies

4 Virtual Currency Users in China

• 4.1 Purchasing and spending habits
• 4.2 Trading and selling habits
• 4.3 Production and creation habits

5 A Look Ahead: The Future of Virtual Currencies in China

• 5.1 How strong is user demand for virtual currencies in China?
• 5.2 How will virtual currencies influence China' s economy?
• 5.3 How well can virtual currencies compete with other online payment systems?
• 5.4 How will today' s virtual currencies in China fare in the long run?
• 5.5 How will China' s government regulate virtual currencies?
• 5.6 To what extent will virtual currencies become conduits for illegal activities in China?
• 5.7 What role will China' s virtual currencies play globally?

List of Figures

• Figure 1: Leading portal-based virtual currencies in China
• Figure 2: The evolution of Tencent' s virtual goods and services
• Figure 3: QQ games and services paid for by Q Coins
• Figure 4: Major online gaming currencies in China
• Figure 5: Top portal-based virtual currency exchange sites
• Figure 6: Top game-based virtual currency exchange sites
• Figure 7: Portal-based virtual currency market prices, March 2007 (RMB per unit)
• Figure 8: Game-based virtual currency market prices, March 2007 (RMB per unit)
• Figure 9: Portal-based virtual currency market prices and real currency exchange rates, March 2007 (RMB per unit)
• Figure 10: Game-based virtual currency market prices and real currency exchange rates, March 2007 (RMB per unit)
• Figure 11: China government bodies involved in virtual currency regulation
• Figure 12: Gold farming and real-world salary comparison