Virtual Money As a Small Payment System in E-Commerce in China: An Economic Analysis

The worldwide proliferation of the Internet led to the birth of E-commerce. Payment system plays an important role in E-commerce. This paper focuses on the capability of network virtual money to serve as a small payment system in Chinese E-commerce, especially in the purchases of virtual products and network add-value services which are B2C businesses. First, we show an overview of virtual money. Then, based on the virtual money mechanisms of supply, usage and out of circulation, we establish an ideal circulation model and an extended real life model to explore the influence of virtual money circulation. From the economics analysis, we drive the conclusion that current mechanisms of virtual money do bring some negative effects on virtual and real world.