China to increase curbs on video gaming industry

China is set to introduce new regulations that will restrict the amount of money and time individuals can devote to video games. The objective of these restrictions is to curb in-game purchases and prevent excessive gaming behaviour. This proposed legislation is a setback for the world's largest online gaming market, which is still recuperating from a previous regulatory crackdown. The announcement caused a significant drop in the share prices of tech giants, erasing tens of billions of dollars from their market value. The proposed restrictions also re-emphasise the prohibition of online game content that threatens national unity or jeopardises national security and reputation.

In 2021, Beijing initiated a move against the gaming industry, decreeing that online gamers under 18 years of age could only play for an hour on Fridays, weekends, and holidays. However, the latest set of restrictions is more extensive. Online games are prohibited from offering rewards that encourage people to play excessively and spend money, including daily login rewards and account top-ups, according to the industry regulator, the National Press and Publication Administration (NPPA). Ivan Su, an analyst at Morningstar, stated that the removal of these incentives would likely decrease daily active users and in-app revenue, potentially forcing publishers to fundamentally revise their game design and monetisation strategies. Pop-up warnings about irrational playing behaviour are also slated to be implemented.

China is the world's largest gaming market, with Tencent leading the global sector in terms of revenue. Following the NPPA's announcement, Tencent's share price plummeted by 12. 4%. Vigo Zhang, Tencent Games' vice president, stated that Tencent would strictly adhere to any new regulatory requirements. He added that since 2021, when the protection of younger players became a priority for Beijing, minors have been spending significantly less money and time on Tencent's games. Shares in NetEase, a competitor, fell by more than 24%. Shares of Dutch tech investor Prosus, whose stock performance is closely tied to Tencent's, fell by more than 14%. The repercussions were felt throughout Hong Kong's Hang Seng Index, which at one point dropped more than 4%. Gaming consultant Daniel Camilo told the BBC that both Tencent and NetEase have numerous free-to-play games that incentivise players to spend money. The restrictions could impact these monetisation models, necessitating a restructuring, and some games might even have to be withdrawn from stores. However, he believes that both Tencent and NetEase will recover in the long term, but the same cannot be said for smaller gaming companies. If a small company loses a few million dollars, it may have to shut down. The gaming industry in China has been struggling in 2023, particularly medium and smaller publishers. The new gaming rules could also expedite the game approval process in the country by mandating regulators to process approvals within 60 days. Game publishers would be required to locate their servers processing and storing user data in China. The administration is soliciting public feedback on the proposals until 22 January.