China’s Draft Online Video Gaming Rules — A Big Blow to The Gaming Industry

In a bid to curb to prevent obsessive behavior, the Chinese government has introduced a draft set of rules for the gaming industry.

The new rules will set an upper cap on the amount of time and money people can invest in video games. Plus, games must do away with the system of daily rewards for logins and top-ups, which encourage people to spend and play excessively. These are common tactics game providers use to keep the players hooked.

The draft rules were designed to safeguard and promote the healthy and prosperous development of the online gaming industry.National Press and Publication Administration

As per Ivan Su, a Morningstar analyst, these incentives are the key reason behind daily active users and in-app purchases. Removing these key motivators will force gaming companies to rethink their game designs and monetization options.

The rules also aim to speed up the approval process, as the regulators will need to process requests within 60 days. Publishers will also have to ensure that their servers used to store and process user data are stored in China.

A similar decision was taken in 2021 when the Chinese government ruled that people under 18 could play video games for only an hour on weekends, Fridays, and holidays. However, the current set of draft rules will have more impact than the previous ruling.

The Chinese stock market mirrored the gaming community’s sentiments. Tencent shares fell by 12.4% in a single day whereas NetEase saw a 24% fall in its share prices. This has wiped out billions of dollars worth of valuation from these company’s shares.

Hong Kong’s Hang Seng Index also fell by as much as 4% and finally closed 1.7% lower than the previous day.

Prosus, the Dutch investor, saw a 14% decline in its investments. Prosus is a tech-focused investment company with a major investment in Tencent.

Daniel Camilo, a gaming consultant, is of the view that this decision will impact the smaller players more than the giants like Tencent and NetEase.

These companies can adapt to the changes and recover their short-term losses in the long run. However, the same cannot be said for smaller companies, which might have to permanently shut down.

Vigo Zhang, Tencent’s vice president, has ensured that the company will implement any regulatory changes. He also expressed confidence in the legislators saying that they are focused on ensuring that the gaming industry has “reasonable business models and operating cadence“.

Regulator Will ‘Earnestly Study’ Public Concerns

The Chinese regulator has assured that the concerned bodies will “earnestly study” public views and concerns to improve these rules and include suggestions, if any.

It also sheds light on the fact that the government took into account various public views during the drafting process itself so that the legislation could include a broad school of thought.

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