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If you thought we have it bad with  micro transactions, game cash shops and virtual economies in the western world you surely don’t know about the QQ coin. In China, a company called Tencent has a monopoly on virtual currencies, one so massive and shady that state regulators fear it may start to affect China’s own currency.

It all starts looking innocently enough. Tencent runs websites with all sorts of games where either subscriptions or items are bought with the QQ, Tencent’s virtual currency. Much like Second Life you can take your QQ and convert it back to cash, and this is where thing’s start getting shady.

Tencent’s reign goes far beyond games, TCIM, the most popular instant messaging service in China also relies on the QQ to buy just about any extra out there, from custom emoticons to clothes for your avatar to pets and you can imagine the rest. Everyone was using QQ coins, brands even started using the QQ for prizes in their promotions.

The currency was so widespread that people started using it for other online transactions, it became something akin to the Paypal. Tencent even partnered with banks to offer a QQ backed debit card system.

Before you knew it you could buy pretty much anything online with the QQ, from a new cell phone to subscriptions to porn sites. In fact a group of girls who call themselves QQ Girls started to emerge online, charging QQ for erotic IM conversations, video sessions and even real life encounters.

But it started to get out out control once the Chinese underworld started to get involved. Small gangs started going after people’s QQ rather than their yuans. Mafias started using the QQ for money laundering.

And so the QQ started to suffer from something that’s usually reserved for real world economies: inflation. To battle inflation and make people buy more QQ Tencent sets up so called “promotional activities” which in reality are more like mafia rackets.

This is how it happens, a man high up in the Tencent corporate chain inputs a some code into his computer and shazzam! 25% of virtual pets get sick. This prompts 25% of users to shell out some QQ to send the pets to the vet. This takes back a good chunk of money out of circulation and also fills  Tencent’s already fat pockets. Sounds fucked up and unethical? You bet your ass it is! But its also good business.

The Chinese government has already started to crack down on the more criminal sides of the QQ market while it has been pushing for more government regulation on virtual currencies, which probably means taxes and a slap to the hand.

If you think this kind of evil could never rear its ugly head in the western world, think again. Tencent has already established its presence in the English speaking side of the Internet with QQ Games, a port of many of its flash based games, and TM2008, an English version of its TMIM system. Be scared, be very scared. Virtual economies are all but fun and games these days and IGE is but a nuisance compared to these bad boys.