China is set to enforce new gaming laws on the nation’s vast video game sector after fresh regulations were applied to reign in excessive use and rewards for repeated play.
As a result, Tencent Holdings Ltd has led an $80 billion sell-off in some of the Chinese market’s biggest online names. The moves have created some panic among investors, bringing back recollections of the hit on tech in 2021, as reported by Bloomberg.
Back then, the government provided an instant shock to its industries, from e-commerce to entertainment, putting checks on the likes of Ant Group and Alibaba, whilst online education was left reeling after profits were declared illegal.
This latest action, confirmed on Friday (Dec 22), includes caps on how long players can play certain games, a ban on content deemed to violate national security and a halt on prizes for frequent log-ins. These changes came without warning and now investors are left to assess the aftermath with share prices sent tumbling.
With Tencent, China’s most valuable company, leading the exodus, its holdings have fallen as much as 16% but NetEase saw a 28% drop in its stocks. Bilibili Inc. took a 14% hit as part of the combined loss of $80 billion in the three stocks’ market values.
What are China’s gaming laws?
This development is China’s Communist regime flexing its authoritarian muscle.
Beijing is wary of the performance and profits of its private sector because it doesn’t want it to become too powerful. The shadow of the government is always visible and at any given moment, it can eclipse the independence of business.
These curbs on gaming follow the 2021 edicts which set strict playtime limits for under-18s as well as freezing the approval of new games onto the market, citing compulsive behavior concerns among players.
Now, new rules will enforce further limits on in-game spending and a ban on reward features for online activity as well as game titles having to limit how much gamers can top-up their digital wallets for spending on play.
Ivan Su of financial market analysts Morningstar stated, “The removal of these incentives is likely to reduce daily active users and in-app revenue, and could eventually force publishers to fundamentally overhaul their game design and monetization strategies.”
Beijing is also said to be monitoring user data, insisting video game publishers host their servers strictly within China.
