Officially, China's Ministry of Culture and the Ministry of Commerce said that in-game monies "will only be allowed to trade in virtual goods and services provided by its issuer, not real goods and services."
According to a release from the two bodies, "using virtual money for gambling will be punished by public security authorities, and minors may not buy virtual money." Sure, the Chinese government hopes to curb gambling and illicit trade, as well as money laundering via virtual money, but this ruling is not a ban.
Professor Richard Heeks of The University of Manchester explains:
This is a government restriction on the use of the quasi-Paypal-like currencies (mainly QQ coins) that are used extensively in China to pay for virtual game stuff. As announced they can now only be used to pay for virtual stuff, and you can't buy real things with them as game companies were allowing to happen, nor can you gamble. This therefore is not about what gold farming clients do: use real money to buy these virtual currencies; it's the mirror image. And it's not about the major trade in gold farming such as World of Warcraft, which relates to other types of virtual currency. And it's not about buying/selling in-game items. And it's not about the power-levelling of avatars. Bottom line: it's not about gold farming.
China Bans Gold Farming!! … Er … But In Fact It Hasn't [ICTs for Development via IncGamers]