China's (Controlled) Virtual World

Zhao Gang surveys his nearly empty virtual world, and finds it to be good. Zhao is head of the tech team that built HiPiHi—China's answer to Second Life. With the virtual world's basic landscape complete, one of Zhao's jobs these days is to wander HiPiHi, schooling roughly 10,000 ethnic Chinese from the mainland, Hong Kong, Taiwan and Singapore who have been specially invited into the test phase to help work out the kinks. The "residents," as they're called, roam, swim and fly around the new world. Zhao approaches two avatars for a chat. Face to face with the virtual world's Master Builder, they have an urgent question: "Can you tell us how to change our clothes?"

Thus begins the education of China's 137 million (and counting) Netizens into the ways of 3-D virtual worlds. With a launch planned for the end of the year, HiPiHi appears to be on track to becoming the first homegrown Chinese competitor to Second Life, the virtual world that's all the rage in the United States. HiPiHi's 38-year-old CEO and founder, Xu Hui, has ambitious goals: he plans to sign up 100,000 users in the first three months. Then he wants to branch out through partnerships with U.S., Japanese and other foreign firms to establish discrete virtual "continents." Ultimately, he sees a handful of virtual worlds, including HiPiHi and Second Life, linked up in one vast universe. "We're on the same road to a dream—virtual worlds are just beginning," says Xu.

Grand talk, to be sure. But the road to Xu's utopia is likely to be bumpy. Part of Second Life's appeal has been its vibrant political debate (witness the heated on-line activity during the French presidential campaign, and numerous anti-Bush placards). By contrast, HiPiHi will have to toe Beijing's authoritarian line, which forbids excessive anti-government criticism, public support for Taiwanese or Tibetan independence and any mention of the banned Falun Gong religious group. To enforce those limits, China has one of the world's most sophisticated Internet-monitoring systems, and enlists tens of thousands of snoops to stamp out "incorrect" speech. HiPiHi will be subject to all the same prying eyes, as well as strict government rules on smut. "There will need to be some HiPiHi nannies—it can't permit a lot of the things that Second Life permits," says David Wolf, CEO of Wolf Group Asia, a Beijing-based consultancy. "It will be Second Life with Chinese characteristics."

What's more, any virtual commerce that arises in HiPiHi will be subject to Beijing's unpredictable and at times heavy-handed policymaking. HiPiHi hopes to introduce virtual currency like Second Life's Linden dollars so residents can buy and sell virtual goods. But it's unclear whether Beijing will allow that. Earlier this year the government cracked down on the abuse of QQ coins, a virtual currency that's part of Chinese Internet giant Tencent's popular online services. Speculators were trading QQ coins for real Chinese renminbi, gamblers were using them to skirt government restrictions and sex-chat workers were reportedly accepting the coins as payment. Early this year the government stepped in, banning the trade of virtual currency for real money and warning Tencent and others to crack down on abuse. "The dispute demonstrated that the Chinese government can't ignore its control of currency systems in virtual worlds," says Han Jingkui, a Qingdao-based Internet analyst.

HiPiHi will also face technological and demographic challenges. Outside major cities like Beijing and Shanghai, most users still log on at Internet cafés that don't have the cutting-edge computers needed for a satisfying virtual-world experience. And Chinese users—mostly young males used to action-packed games like World of Warcraft—may not take to HiPiHi's do-it-yourself world. "The virtual-life model hasn't been tested in China yet, and it will be a challenge for operators to get a large number of users in the beginning," says Liu Bin, a Beijing-based analyst with tech and Internet consultancy BDA. "I think this is a major problem."

A wholesome virtual world, on the other hand, might appeal to Chinese women and parents. Ironically, China's rigid controls on Internet content could actually help differentiate HiPiHi in the global market as a kinder, more family-friendly version of Second Life. It has other strong suits. Xu is a successful, well-connected businessman who was rated one of China's top 10 Internet entrepreneurs by the Chinese media in 1999. He's assembled a crack, 60-strong team of virtual engineers, political economists and marketers, and claims to have attracted interest from top-tier players in Japan and the United States. (Xu won't say who.)

The firm is winning points for its sharp special effects and building tools, which are more user-friendly than those in Second Life. "HiPiHi has decided that your average 'Zhou' in China would probably have issues with Second Life's interface, and is looking to better it," says Wolf.

Much depends on what type of user HiPiHi attracts. Netizens looking for raunchy sex will be disappointed—HiPiHi's avatars can't even strip nude. But Xu says there's still a chance for romance; indeed, it's already blossoming. One resident, "Wen Xi," the avatar of a woman from Hangzhou, apparently has several love interests—and she's built a hip, bamboo-lined virtual bungalow for entertaining pals. She's just the type of creative resident Xu and his investors hope will populate HiPiHi—but pioneers like her are scarce. Xu and Zhao have built a world. Now they can only wait to see if the Chinese will come.