An emerging trend in virtual gifting market is attracting China's tech firms and financial institutions into using gold as a potential commodity for virtual trade and business.
Reuters reported that the country's biggest bank, Industrial and Commercial Bank of China (ICBC) is supporting Tencent's digital gold packets, known as "microgold," in which users can send funds with real-time gold value through the company's messaging platform WeChat.
The sending of virtual gifts is practiced by online communities and has been adopted by financial institutions as part of financial innovation where new markets for virtual goods and smartphone-driven exchanges have opened potential growth.
Reuters cited a memo released to ICBC staff on Friday, March 3, which said that WeChat microgold platform has spurred an "explosive growth" in new gold accounts.
During the Lunar New Year period, about 70,000 microgold packets worth about 100 million yuan were sent by WeChat users, the memo said.
The bank said that they are expecting that more than 300,000 new gold accounts to be opened by users as a result of its partnership with Tencent.
According to the report, the number and volume are expected to grow as similar virtual products on the platform indicate.
The idea of the gold packets are based on WeChat's virtual red envelopes, or digital "hongbaos," which allow users to send funds to friends, the report said.
During the Lunar New Year, 46 billion virtual red envelopes were sent by users using WeChat.
"The money isn't much but it's a matter of affection," Liri Kuangjiu, a Tencent user who had sent 1.3 grams of virtual gold and 520 yuan in a digital hongbao to his girlfriend, said.
Another user, Kong Lingxin, a student from Tianjin, said she used her smartphone to buy, gift and store gold online. She said she spent 10,000 yuan ($1,452.88) of her savings on gold products this year on Alibaba-linked platform "Cun Jinbao" (which literally means "store golden treasure").
Gold rush
According to gold analysts, the early presence of tech firms into virtual gold trading may help stimulate the Asian market.
"It will become a support for gold demand and the gold price if WeChat gold packets become popular, considering the amount of traditional red envelopes users send," Xie Qingpeng, a gold analyst at Guotai Junan, said.
As the government noticed the trend, a guideline was issued by the Ministry of Industry and Information Technology (MIIT) last week, urging tech firms to assume a bigger role in gold trading.
A September report issued by G-banker, an online gold trading platform backed by Softbank China Venture Capital and Alibaba, said that millennial consumers make up more than 60 percent of online gold trading.
Young investors consider gold as a more affordable and convenient investment that real property, an analyst said.
"It's nearly impossible for young people to invest in first-tier cities in China. Alternatively, they put small amounts into gold, as a low-risk investment," Helen Lao, Singapore-based metals analyst at Argonaut Securities, said.