China softens latest video-game crackdown to mollify video game industry
Chinese companies linked to the gaming industry regained some ground on Wednesday after what had been a brutal start to the weekend as the government appeared to ease up on new regulations for the sector. Shares of Tencent were up as much as 6% while NetEase were up over 10% as the Hong Kong market resumed after the Christmas and Boxing Day holidays. Those gains are still some way off from Friday’s market rout.
A set of draft rules released by Beijing on Friday blindsided investors, wiping out about $80 billion in value from the industry. The new measures from the National Press and Public Administration (NPPA), the industry regulator, are aimed at curbing the amount of time and money players spend on online games. Some of the changes proposed include barring developers from rewarding players for daily log-ins, and providing incentives for people to livestream games.
But developments since the weekend suggest Beijing may be trying to temper fears of another crackdown.
The NPPA said in a post on Saturday that it would “carefully study” public views in response to the draft rules, particularly around Articles 17 and 18. Those two articles focus on online duels between players, daily log-in rewards, and spending limits. Regulators will accept feedback on the new rules until Jan. 22, 2024, the post said.
And on Monday, the regulator approved 105 new online games, including those from major companies like Tencent and NetEase. The approvals demonstrate that the relevant departments “actively support” the development of the online games industry, according to a post from the Game Publishing Committee of Chinese Audio-Visual and Digital Publishing Association on WeChat. The association also pointed to steady approval rates this year which have given industry players a “reassurance”.
State-backed media outlets also tried to calm nerves through articles explaining the rationale behind the rules. One said the latest measures are meant to extend restrictions introduced in 2019, a comment that a spokesperson from NetEase Games relayed to Fortune as well on Saturday.
Smaller gaming firms also announced share buybacks, which can be seen as another attempt to calm investors. Eight companies had unveiled plans to buy back shares worth up to $110 million combined, Reuters reported on Monday.
The draft measures released on Friday aren’t the first time authorities have targeted the video games industry.
Regulators limited minors to 1.5 hours of gaming time in 2019 a day on weekdays before clamping down harder in 2021 and ratcheting down the limits to just one hour on Fridays, weekends and public holidays. In July 2021, regulators also suspended all video game approvals for almost a year and only started granting approvals again in April 2022. State media got involved in the crackdown as well, with one outlet calling video games “spiritual opium.”
But even before Friday’s surprise announcement, the last 18 months have been friendlier for gaming companies. Regulators approved more video games in the first half of this year than in the whole of 2022.
