The latest draft rules represent the strictest measures yet, prohibiting games from offering probability-based draw features to minors and preventing auction of virtual gaming items.
Chinese authorities are considering revisions to newly drafted online gaming rules, responding to widespread concerns and the significant economic impact the proposed restrictions have had on major tech companies.
The State Press and Publication Administration, the media regulator responsible for the rules, has acknowledged the “concerns and opinions raised by all parties” and expressed a commitment to carefully study and improve the regulations, as reported by state broadcaster CCTV.
The draft online gaming rules, released on Friday, introduced a comprehensive set of regulations aimed at curbing online spending and rewards in the video game industry. The immediate fallout from the announcement saw a massive decline in market value for China’s two largest tech companies, Tencent Holdings, and Netease, with as much as $80 billion wiped off their combined market capitalization.
Among the proposed regulations, the most impactful were restrictions on online games providing rewards to players for daily logins, initial spending on a game, or consecutive spending on a game—common incentive mechanisms in the gaming industry. These rules sparked immediate concerns among investors and industry leaders, leading to a market downturn and widespread panic.
According to reports, regulators are now considering changes to the wording of certain sections of the draft rules, particularly those related to limiting the ability to encourage daily logins and in-game spending. This potential revision is seen as a response to the industry’s concerns and the broader economic repercussions of the proposed measures.
China has been tightening its grip on the video game industry over the years, with the first major intervention occurring in 2021 when Beijing imposed strict playtime limits for individuals under 18 and suspended approvals for new video games for an extended period. The move was driven by concerns about gaming addiction among young people. Although China revised its stance in the following year and resumed approving new games, regulators continued to focus on curbing playtime and spending among minors.
The latest draft rules represent the strictest measures yet, prohibiting games from offering probability-based draw features to minors and preventing the auction of virtual gaming items. Additionally, the regulations underscore Beijing’s concerns about user data, mandating that game publishers store their servers within China.
The proposed revisions come at a time when China’s video game market has shown signs of recovery, experiencing a 13 percent growth in domestic revenue to $42.6 billion in 2023, according to the industry association CGIGC. Despite the positive trajectory, the strict regulations outlined in the draft rules have raised concerns about the potential impact on the global video games market, given the substantial influence of Chinese gaming giants.
In the aftermath of Friday’s announcement, several U.S. and European video game developers experienced modest share declines, but the losses were overshadowed by Tencent’s dramatic 16 percent tumble, wiping about $54 billion off the company’s market value. The potential revisions to the rules offer a glimmer of hope for the industry, but the situation remains fluid, and stakeholders are closely watching for further developments.
As the State Press and Publication Administration invites public comments on the proposed rules until January 22, the industry awaits additional insights into potential adjustments, keeping a keen eye on the evolving landscape of China’s dynamic and influential gaming sector.