China’s Proposed Regulations on Online Video Gaming — A Significant Setback for the Gaming Industry

China’s Draft Online Video Gaming Regulations

In an effort to prevent obsessive gaming habits, the Chinese government has unveiled a proposed set of regulations tailored for the online gaming industry.

Limits on Gaming Time and Spending

The proposed regulations introduce limits on the time and funds players can spend on video games. Additionally, the design of games is expected to change as the rules mandate the removal of daily login incentives and financial top-ups, tactics known to keep players engaged continuously.

Goal of Gaming Regulations

According to the National Press and Publication Administration, the draft of these regulations aims to protect and stimulate the healthy growth of the online gaming sector.

Impact on Game Providers

Ivan Su from Morningstar expresses that these rule-imposed changes will challenge game developers to innovate their game design and find new revenue generation strategies, as typical user engagement tactics will no longer be viable.

New Game Approval Process

The suggested rules also look to expedite the game approval process, demanding regulators to finalize decisions within a 60-day period. Moreover, game publishers will be required to ensure that the servers handling user data are located within China.

Reflections of the 2021 Decision

This regulatory measure recalls China’s 2021 resolution that limited gaming for individuals under 18 to weekends and holidays, projecting a stronger impact on the gaming culture and industry than the previous limitations.

Market Reaction to New Gaming Regulations

The draft rules have already reflected on the stock market, resulting in significant declines in the shares of gaming giants like Tencent and NetEase and erasing billions in market valuation. Hong Kong’s Hang Seng Index also experienced a downturn following the announcement.

Investor Reactions and Predictions

Following the draft’s release, Prosus, a Dutch investing powerhouse with substantial stake in Tencent, faced a steep decline in its portfolio value. Industry consultant Daniel Camilo predicts that while large companies may recover, smaller players might endure irreversible damage.

Tencent’s Stance and Adaptation Plans

Vigo Zhang from Tencent affirms the company’s commitment to comply with any regulatory changes and voiced confidence in the government’s efforts to ensure the industry adheres to sensible business practices.

Regulatory Commitment to Public Input

Chinese regulators have pledged to thoroughly consider public feedback while refining the draft rules, indicative of the inclusive approach taken during the rule-making process to incorporate diverse viewpoints.

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