As a prisoner at the Jixi labour camp, Liu Dali would slog through tough days breaking rocks and digging trenches in the open cast coalmines of north-east China. By night, he would slay demons, battle goblins and cast spells.

Liu says he was one of scores of prisoners forced to play online games to build up credits that prison guards would then trade for real money. The 54-year-old, a former prison guard who was jailed for three years in 2004 for "illegally petitioning" the central government about corruption in his hometown, reckons the operation was even more lucrative than the physical labour that prisoners were also forced to do.

"Prison bosses made more money forcing inmates to play games than they do forcing people to do manual labour," Liu told the Guardian. "There were 300 prisoners forced to play games. We worked 12-hour shifts in the camp. I heard them say they could earn 5,000-6,000rmb [£470-570] a day. We didn't see