The $45 billion online gaming business in China has taken a hit due to plans to cut spending and regulate the industry.
Investors are in a state of worry after regulators announced new guidelines last week, including spending limitations for online games, a prohibition on games that reward players for checking in every day, and a ban on lucky draw components supplied to minors.
According to The Guardian, the market value of Tencent's stock dropped over $43 billion as its shares dropped over 12% on Friday, December 22. NetEase's stock also dropped over 24%. The social networking site BilliBilli, which gets about 17% of its income from gaming, even saw an almost 10% drop in share price on Friday.
The authorities have heard all sides' worries and thoughts, according to state media, and the suggestions may yet be improved and revised.
Crackdown on the Gaming Sector
In an effort to limit kids' and teenagers' gaming time, Chinese officials first focused on the country's enormous gaming industry in 2021.
Video games were referred to as "spiritual opium" by state-run media at that period. The business went into a spiral when the government introduced a restriction that was difficult to enforce, which indicated that children under 18 may play games for only two hours per day, including on weekends and holidays.
The popularity of video games persists despite China's crackdown on the sector.
This year, domestic sales increased by 13%. Half of China's population, or 668 million people, played video games in the first half of the year, according to the government-run industry group CGIGC, which released its numbers in July.
In a report by NewScientist, researchers from the University of York discovered this year that the 90-minute daily gaming ban that was put in place in 2019 did not reduce heavy gaming at all. Nevertheless, the year 2022 saw the first-ever decline in the online gaming industry.
Though they had risen from their low points by Wednesday, December 27, Tencent and NetEase shares on the Hong Kong stock market are still lower than they were before Friday.
Tencent Games' Vice President Vigo Zhang has promised that the business would adhere rigidly to any new rules.
Latest Regulations by Chinese Authorities
According to experts, the new regulations will have the greatest impact on smaller gaming enterprises. After Beijing's initial crackdown in 2021--which blocked the approval of new games for over a year--about 14,000 smaller studios and video game companies allegedly deregistered in the second half of that year.
A new regulation mandating the processing of gaming license applications within 60 days is one of the industry-welcomed improvements included in the most recent proposals.
On Friday, Beijing also gave the go-ahead for 40 new imported games to be released in China. An industry group said that the government's approval of 105 more games this week demonstrates its support for the expansion of online gaming.
The deadline for public feedback on the suggestions is January 22, 2024.
