China's Harsh Rules On Online Gaming Are A Cause For Concern Among Global Investors
China has announced a set of new rules aiming to curb the penetration of online video games among the masses. The new rules ban companies from providing rewards to all categories of players, such as new players, daily players, and relentless players, which the companies often give to make users addicted to their apps. Moreover, games are asked to set limits on how much players can top up their digital wallets for in-game spending, store the user data on the servers within China, abstain from offering probability-based lucky draw features to minors, and abstain from enabling the speculation and auction of virtual gaming items.
The administration is seeking public comment on the rules through January 22, 2024.
Being the world”s largest online gaming market, which resurrected recently from the setbacks derived from government-imposed regulations 2 years ago, the new draft regulations were not well received by China, with shares of the world”s biggest gaming company, Tencent Holdings, and their closest rival, NetEase, dipping 16% and 25%, respectively. With this, tech investor Prosus, which owns a 26% stake in Tencent, faced backlash on the pan-European stock index, losing 14.2% of its share value.
The draft rule also affected global gaming shares, with U.S. gaming stocks Roblox, Electronic Arts, and Unity Software plunging between 1.7% and 3.1% on Friday, while in Europe, French video game developer Ubisoft fell more than 3%.
“It”s not necessarily the regulation itself; it”s the policy risk that”s too high,” Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong, told Reuters. “People had thought this kind of risk should have been over and had started to look at fundamentals again. It hurts confidence a lot.”
According to Tencent Games” vice president, Vigo Zhang, the company will not make any fundamental changes as “its reasonable business model or operations” for games, adding that the company has been strictly implementing regulatory requirements, the Reuters report said. Minors have been spending very little money and time on Tencent”s game since 2021, when minor protection became a focus for Beijing, Zhang added.
NetEase has not responded to queries. This is not the first time Beijing has been harder on video games. In 2021, China imposed strict playtime limits for children under 18, and authorities had not given any approvals for new games for six months. Moves that aim to prevent online gaming addiction.
Moreover, last year, the authorities came up with new restrictions with regard to spending, which curbed “in-game” spending.
