Wed. Apr 24th, 2024

China has revealed a fresh set of regulations aimed at curtailing the time and money spent on online gaming, leading to a significant downturn in the stock market for some of the country’s major tech corporations.

The proposed restrictions, released by the government regulator, focus on limiting in-game purchases and curbing obsessive gaming behavior, reiterating a ban on online content deemed detrimental to national unity, security, reputation, and interests.

This news resulted in a substantial decline in the stock values of tech giants, with industry leader Tencent experiencing a more than 12.0 percent drop in Hong Kong. The move comes after Beijing initiated actions against the gaming sector in 2021 as part of a broader crackdown on Big Tech, including imposing restrictions on children’s online gaming time.

Despite a temporary freeze in gaming licenses being lifted, the newly proposed regulations indicate ongoing scrutiny of the tech industry. The draft rules introduce limitations on recharging in-game wallets, eliminate features promoting extended gameplay, and require pop-ups warning users of “irrational” playing behavior.

Market analysts, including Michael Brown from broker Pepperstone, suggest that the comprehensive tech crackdown in China appears to persist, possibly intensifying. Since 2021, regulations have restricted children under 18 to play online only between 8:00 pm and 9:00 pm on specific days during the school term, with mandatory ID card verification to ensure accurate age reporting.

China, the world’s largest gaming market, experienced shockwaves as Tencent, the global revenue leader in the sector, witnessed a staggering $54 billion reduction in its market value. Rival companies such as NetEase and XD also faced substantial losses. The repercussions extended to Hong Kong’s Hang Seng Index, causing a more than four percent dip at one point.

Other tech firms, including Meituan and Alibaba, were not immune to the sell-off, with Meituan losing nearly four percent and Alibaba around two percent. Analysts speculate that the regulatory measures could be an attempt to redirect consumer spending or a response to elevated youth unemployment levels.

Zeng Xiaofeng, a vice president at Niko Partners, commented that the regulations would significantly impact most games in China, requiring companies to revamp their monetization models. Some independent game studios see this as an opportunity for those focusing on innovation and providing high-quality user experiences. Cheng Gong, CEO of Han-squirrel Studio, emphasized the need to break the cycle of revenue-driven strategies in the industry.

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