* Tencent, ICBC pair up to offer virtual gold
* Digital gifting mkt could spur demand - analysts
* Market targets China's millennial generation
By Muyu Xu and Adam Jourdan
BEIJING/SHANGHAI, March 7 China's virtual
gifting market, typically the domain of plugged-in young
consumers celebrating special occasions or flirting, is luring
major financial institutions keen to boost trade of another
auspicious commodity: gold.
Tencent's digital gold packets, known as "microgold", are
backed by the country's biggest bank, Industrial and Commercial
Bank of China (ICBC). They allow users to send funds
that track the real-time value of gold to friends over the
firm's popular messaging platform WeChat.
It's a financial innovation on the concept of virtual gifts,
such as digital roses and chocolates, more commonly used in
online communities and which have more sentimental value than
any tangible economic worth.
For financial institutions, China's booming virtual goods
and smartphone-driven exchanges offer new markets to boost
trading volumes in everything from banking services to gems.
ICBC, in an internal memo seen by Reuters and sent to staff
on Friday, said the WeChat microgold platform had helped drive
"explosive growth" in new gold accounts.
Over the recent Lunar New Year period, WeChat users sent
70,000 microgold packets worth just under 100 million yuan
($14.51 million) across the chat platform, the ICBC document
said. It expects over 300,000 new gold accounts to be opened as
a result of the Tencent tie-up. Neither ICBC nor Tencent were
immediately available for comment.
While the volumes are relatively small, the take-up of
similar virtual products on the WeChat platform suggests room
The gold packets are based on WeChat's popular virtual red
envelopes, or digital "hongbaos", that also allow users to send
funds to friends, albeit of a fixed nominal cash amount. Over
the Lunar New Year period, users gifted 46 billion virtual red
envelopes over WeChat.
For many Chinese, the yellow metal has both emotional and
A Tencent user who goes by the name Liri Kuangjiu posted he
had sent 1.3 grams of virtual gold and 520 yuan in a digital
hongbao to his girlfriend.
"The money isn't much but it's a matter of affection," he
Kong Lingxin, a 20-year-old student from the northern city
of Tianjin, uses her smartphone to buy, gift and hoard gold
Kong has spent 10,000 yuan ($1,452.88) of her savings on
gold derivative products this year on Alibaba Group Holding
Ltd-linked platform "Cun Jinbao" - literally "store
"My family has a history of collecting gold bars, which
influenced my choice of investment," said Kong. "I chose an
internet platform because it's easy to track gold prices, see
your profits and make trades."
Gold analysts said the push by tech firms into the sector,
though still at an early stage, had potential longer-term to
stir up a sluggish Asian market if it caught on.
"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," said Guotai Junan gold
analyst Xie Qingpeng.
Beijing has taken note of the trend. The Ministry of
Industry and Information Technology (MIIT) issued a guideline
last week, calling for tech to play a bigger role in gold
China's millennial consumers, loosely defined as those born
between 1980 and 2000, are seen as the drivers of future growth
in everything from retail to housing.
They make up over 60 percent of internet-based gold trading,
according to a September report issued by G-banker, an online
gold-trading platform backed by venture capital firm Softbank
China Venture Capital and Alibaba.
Amid a property price spike, gold offers younger buyers a
more affordable and accessible investment.
"It's nearly impossible for young people to invest in
property in first tier cities in China. Alternatively, they put
small amounts into gold, as a low risk investment," said Helen
Lao, Singapore-based metals analyst at Argonaut Securities.
($1 = 6.8935 Chinese yuan)
(Reporting by Adam Jourdan; Editing by Sam Holmes)