Faced with further potential economic pain, Beijing is looking to open up other markets. The centerpiece of its efforts is a push this summer to negotiate an Asian free trade pact called the Regional Comprehensive Economic Partnership, or R. Midlevel and senior trade officials from across the region began meeting this week in Zhengzhou, China. Their ministers are then scheduled to join them in Beijing on Aug.
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The goal is to outline a deal that Asian leaders might then work out at a summit meeting in Bangkok in November. Working out a deal would require solving some thorny issues.
Starting in May of last year , China began reducing its tariffs. Trade tensions with the United States were rising.
Winning support could be a tall order. India, for example, with its size and fast growth could be a potentially vast buyer of Chinese goods. Still, Indian pharmaceutical makers want to ship more generic drugs to China. Service industries, like computer programming, want to make it easier for Indian programmers to get temporary work visas there.
Yet China has been wary of opening its doors to Indian pharmaceuticals and Indian workers. One possibility is that the negotiations could reach a deal that does not initially include India, said Mari Pangestu, a former trade minister of Indonesia. But that would limit the benefits for the other countries in the talks. Even if a deal is struck, it is not clear how much China might benefit.
A number of potential members, like Japan and South Korea, are highly competitive manufacturers themselves and may not import a lot more. China has also been in long-running talks with Japan and South Korea on a trilateral trade partnership. In general, virtual economies are supported by assets collected during a game — such as the power to slay a dragon — that are then sold on the Internet for real dollars to other players looking for a competitive edge. While the size of the market is debatable, experts agree that virtual economies are expanding rapidly and warrant more attention. Virtual economies started out as simple affairs, many of them derived from fantasy role playing games like Dungeons and Dragons.
This virtual wealth was innocuous until people began paying real greenbacks for it on eBay or any number of trading sites. What changed? When time-pressed people met the gamers who spend most of their day in these worlds, a market was born. After a negotiation, the deal can be completed through an instant message screen and online payment systems like PayPal. Conversely, these trades can happen in an open market through web sites that act as stock exchanges where virtual loot is swapped for real dollars.
Increasingly, companies are setting up exchanges to facilitate virtual asset trading.
Linden Lab, for example, this month started its own currency exchange for its Linden dollars. A large unresolved question about virtual worlds is whether mining and trading digital assets can be defined as real-world work. For instance, should the U. Hunter and Whitehouse both suggest that life in the virtual world is indeed work.
After all, work is merely creating something tangible that is valued by others. Increasingly, these worlds are becoming workspaces. For some highly-skilled players, it could actually be a significant source of income. If a player in Asia can acquire one power an hour by playing a game and then sell it for a profit to another player, he could make a living wage, accounting for exchange rates. In the U. But the equation changes significantly for players in China and other parts of Asia due to weaker currencies compared to the U. He estimates a gamer could pull in roughly half the U.
For example, in Second Life — a game that launched in June and that now has about 60, players — Australian resident Nathan Keir, known as Kermitt Quirk in the game, created Tringo, a cross between bingo and Tetris. Since Linden Lab allows players to keep the intellectual property of anything created in Second Life, Keir was able to sell his game in the real world.
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Experts such as Hunter argue that the burgeoning virtual asset market embedded in games like Second Life and World of Warcraft will create economic petri dishes to monitor consumer behavior, currency changes and productivity. As a result of the gains in the virtual economy, game companies may increasingly look like financial institutions, says Whitehouse.
For instance, Linden Lab has changed its business model, which was initially based on subscriptions. Today, the company takes an increasing role in its Second Life economy — trading currency, selling land, allowing members to build and then charging a tax. The structure of Second Life means Linden Lab has to know a little economics — including the role of a Central Bank — since executives are something akin to virtual Alan Greenspans.
Linden Lab controls money supply and land supply. Too much currency could lead to a crash on the open market. Too many plots for sale could depress property values.
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Worlds like Second Life can provide for micro-economic insights on the way people react to changes, adds Ondrejka. In , a group of players protested what they viewed as excessive taxation on players who built those properties that added the most value to society. The issue was resolved by introducing permanent structures to the game. Castronova notes that those types of skirmishes are what make virtual worlds so interesting for economic studies.
For instance, a flat tax could be tested along with inflation models, money supply changes and elasticity of demand. These worlds are a tool to experiment and change characteristics of central banks.