Commentary on Political Economy

Monday 25 December 2023


 Tencent Sheds $46 Billion As China Targets Gaming

Chinese authorities, who have long worried that video-games are bad for society, have taken another major step to wean people off them.

China’s videogame regulator on Friday proposed measures intended to reduce how much time and money people spend on computer and smartphone games. It suggested eliminating incentives that can get people hooked on games, including rewards for playing daily, and limiting how much people can spend within the game.

The proposals put the onus on China’s biggest game makers, which saw their stock drop dramatically. Shares in tech giant Tencent Holdings fell 12% in Hong Kong, erasing $46 billion worth of market value, while Chinese rival NetEase dropped 16% in New York.

China’s ruling Communist Party has controlled what its citizens can access on the internet and in other media, an approach that puts it at odds with the U.S. and other democratic powers that say Beijing is suppressing free speech. But when it comes to videogames, China and its rivals share an underlying interest.

Since videogames became popular decades ago, lawmakers worldwide have been concerned that videogames can cause addiction and fuel real-life violence, especially among minors. The difference is that China has flexed its authoritarian power to take steps to do something about it, though there is mixed evidence about whether its measures worked.

“What the Chinese have in common with the U.S. and European governments is that there is this deep-seated skepticism toward videogames,” said Joost van Dreunen, chief executive of videogame-analytics company Aldora. “In China, this is how it manifests. They can do whatever they want.”

From 2000 to 2015, China banned videogame consoles such as Nintendos, Sony PlayStations and Microsoft Xboxes, making it hard for a generation of Chinese people to experience popular games like Super Mario and Halo. In explaining the ban, Chinese authorities cited concerns about exposing children to violent content.

Authorities also stepped in over the past decade as online and smartphone games grew in popularity. In 2018, they limited videogame releases. In 2019, they limited minors to 90 minutes of playtime on weekdays.

And then in 2021, a state-controlled media outlet referred to internet games as “opium for the mind” and “electronic drugs.” Shortly after that article was published, China introduced rules on when people under 18 years old could play: only between 8 p.m. and 9 p.m. on Fridays, Saturdays, Sundays and public holidays.

Minors are banned from playing from Monday to Thursday. They are required to register their real names and government- issued identification documents to play games. In democratic countries, van Dreunen said, “that’s a decision you make as a family, as a parent.”

There is conflicting evidence on whether the playtime restrictions are effective. Research- firm Niko Partners said last year that a survey of 1,250 Chinese youth gamers found that 77% of respondents reduced the amount of time they play each week as a direct result of the new regulations.

An August 2023 research paper, led by the University of York’s David Zendle and published in Nature Human Behavior, said there was no evidence that Chinese playtime mandates reduced heavy gaming. The paper said it remains a challenge to reliably identify minors online, in part because of workarounds, such as adults sharing their IDs to let minors play outside restricted hours.

Since deploying the three-hour a-week rule in 2021, government regulators had largely left the videogame industry alone—which is why Friday’s draft proposals stunned analysts. China’s videogame regulator, the National Press and Publication Administration, said it is seeking public comment on the proposals until Jan. 22. It didn’t give an explanation for why it proposed the measures now, saying only that it sought to strengthen the management of online games and to “safeguard the physical and mental health of minors.”

The proposals have several elements. One is to eliminate incentives to play games, such as the reward for logging on daily. Another is to reduce how much money people spend on games, by imposing spending caps or eliminating bonuses for buying digital goods. They also say videogames should prominently display advice on playing games in a mentally healthy way.

If enacted, the proposals are likely to reduce users and revenue for the companies, said Morningstar analyst Ivan Su, and “could eventually force publishers to fundamentally overhaul their game design and monetization strategies.”

China is a huge videogame market, the world’s second-largest after the U.S. by sales, according to gaming-market research firm Newzoo.

—Jiahui Huang and Mauro Orru contributed to this article.

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