From Gold Farmers to Kings: Online Gaming in China

For Beijing, managing China’s online world has become a governance test. From health issues to political consequences and lawsuits, oversight of the virtual community has tested the government’s abilities.

In the domestic political arena, the government now requires that all online gamers register their real names as their in-game character IDs.  The move comes after a series of calls within the Chinese government for a ‘real name system’ among the country’s bloggers and netizens.  State law requires customers at internet bars to register their national identification number before logging on, however the regulation is rarely enforced.

The government claims that, for online gaming, the system is in place to monitor potentially addictive behavior among the massive virtual population. In late 2008, the Chinese Ministry of Health officially designated Internet Addiction Disorder (IAD) a clinical disease. Concern over the public’s health came after several high-profile incidents involving intense online sessions, including the death of one Guangzhou man from exhaustion following a three-day gaming binge.

Regulations now in place require that after three hours of gaming, players will only be able to accrue half of their character’s experience points, while anything beyond five hours will result in no level advancement. All of the major gaming companies operating within China have agreed to adhere to the new regulations. “Internet rehab centers,” aimed at weaning addicted youth off their Internet dependence, are now popping up around the country. Most of the patients are young males, 15-21 years old.

Nardi sees the situation a bit differently.

“There is no real internet addiction problem in China any more than there is anywhere else. It is also not a clinical category,” Nardi said. “It is more of the engaging nature of the game that draws people to step away from their own responsibilities…However, for the Chinese, [there] is some education focus…anything that takes their kids away from education, they’ll tend to get up in arms about.”

McGee has a similar impression. “The impact on society is not something that you really notice no more than the number of people that would go to watch a popular movie in the U.S.,” said McGee. “It is a form of escape and entertainment that most people here take for granted.”

On the financial side of gaming, several issues have arisen over the ownership rights of “virtual property,” or items such as weapons, armor, and health potions gathered during online play.

“The biggest controversy will probably come from virtual property and to what extent do the gamer’s interests conflict with the game company,” Dibbell remarked. “The most popular judiciary ruling came out of Beijing a few years ago when one player’s game was hacked for his virtual property. He got no satisfaction from the police, so he sued the gaming company and won a settlement for the return of his virtual property. The gaming company has a responsibility to protect the gamer’s property.”

In April 2004, Dibbell set out to make the sale of imaginary online goods his primary source of income. Selling virtual tools to players around the world, he made US$47,000 by the fiscal year end. Worldwide trade in virtual goods has an estimated value of US$250-900 million. From Tokyo to Beijing, Los Angeles to London, the virtual property trade has become a global industry.

Yet for others, the trade can be a matter of life and death. In 2005, a Shanghai man was sentenced to life in prison after he stabbed a fellow gamer for selling his virtual sword.  The man took matters into his own hands after legal recourse failed. In February 2007, 14 government agencies issued a statement banning the use of virtual currency to buy real-world goods, however the move did little to stem virtual markets.

“Gold farming” has also been a major point of debate. Advancing one’s character can be a tedious and time-consuming process. China’s gamers have stepped in to fill the market, playing for those with little time to spare and leveling up their characters, all for a slim slice of real-world money.  Dibbell explained that Chinese gold farmers spend up to 12 hours a day playing games like World of Warcraft and Lineage II. Their employers pay them 30 cents an hour to grind away for gold and experience. More affluent gamers in the West tend to be the primary buyers of the gains these “farmers” accumulate.

Online gaming has taken off in China, but there are indications that the market may be reaching a saturation point. According to SinoCast Daily Business Beta, 70% of China’s online game companies spend more than they earn. Only the largest of publishers such as The9, whose distribution rights for World of Warcraft China expire in June, are able to turn profits. Analysts note that while the most popular games generate millions in revenue, countless others fall by the wayside, countering any company profits through wasted R&D and operating expenses.

One critical issue for company profitability lies in the distribution process of new software. While China’s lax regulation of intellectual property rights is nothing new, gaming companies are seeking to protect their software through innovative delivery systems.

“Western game publishers are focused almost entirely on a box product which sits on a shelf and is sold in a retail establishment,” said McGee. “If you release a box product somewhere else in the world, it is going to come to China and it is going to be pirated…Chinese publishers, on the other hand…consider this the environment so they do not build box products which sit on a shelf in a gaming store. They build online-only games which they monetize by selling time or items inside of the game.”

California-based publisher THQ Inc. recently opened offices in Shanghai to better tap into the Chinese market. Company of Heroes, one of the company’s most successful online games in the U.S., is being adapted exclusively for Chinese gamers as a free-to-play, microtransaction-based game.

Spicy Horse Games in Shanghai.

“The business model is different in Asia, you play by the hour and it is not subscription based,” Dibbell explained. Gamers in China rarely have access to credit cards, so time spent in most online games is charged on a per-use or hourly basis, as opposed to the U.S. model of monthly subscriptions.“Before World of Warcraft existed in Korea, Taiwan and China, there were already games that had players in the millions that had not crossed over into the West…The advantage that World of Warcraft has is that it is able to straddle both markets.”

McGee sees the continued potential for online gaming in China.

"It is important to remember that China is very large, the number of people playing online games is up to 200 million,” McGee said. “While these numbers may sound high to someone in the U.S., it is really not much compared to the billion plus people that are here."


Steven P. Jefferson is a graduate student in the University of Southern California School of Policy, Planning, and Development. He is president of the University of Southern California International Public Policy & Business Association.

Peter Winter is a graduate student in Public Diplomacy at the University of Southern California Annenberg School for Communication. He is deputy editor of US-China Today.