China is the most populous country in the world, at least according to United States Census data, with India very close in second place and it would not be surprising if it rose to first. Unlike other countries, China imposes stricter regulations and restrictions, in addition to monitoring its citizens. Therefore, it is not surprising to see China announcing a series of rules to reduce spending on online video games, causing shares of Tencent and other large companies to fall.
China has a long history of restrictions in the gaming sector. For several years, we have seen how the Asian giant has banned the release of games in the country because they did not comply with “communist” norms and censorship had to be implemented. Streaming of video games considered unsuitable or inciting violence has also been blocked. In 2021, Valve finally managed to bring Steam to China, but it only had a catalog of 53 games instead of over 50,000 that it should have.
China announces new rules to limit spending on video games: Tencent drops 16%
Perhaps one of the toughest decisions imposed by China on its citizens was to establish a limit for playing centered on minors under 18 years of age. The country was proud to have achieved that 70% of children followed the rules and only played 3 hours of video games per week. China’s stance on video games has been quite unstable, sometimes willing to shut down completely, but when it saw the revenue generated by video games, it began to accept them again.
However, now it seems that China has issued an ultimatum, as it has announced new rules aimed at reducing the spending on video games by players. Chinese regulators want to impose a series of spending limits on online games and, with this statement, large Chinese companies have suffered a collapse. Investors have sounded the alarm, and major corporations like Tencent saw their shares drop 16%, NetEase plunged 25%, and even Western companies like Ubisoft fell more than 3% and Electronic Arts decreased by 3.1%.
New rules ban rewards, raffles, and auctions in online video games
Tech investor Prosus also suffered a 14.2% drop, as it holds a 26% stake in Tencent. According to Vigo Zhang, vice president of Tencent Games, these new rules from China on video game spending will not force the company to change its business model. He also noted that since China imposed time limit rules on video games for children, their spending on online games has decreased significantly.
With these new rules, China not only seeks to limit spending on these games but also plans to ban rewards. If true, this could be the end of microtransactions in the Asian country. Additionally, a ban on raffles and auctions in virtual games has been announced, essentially ending almost any type of monetization and revenue. While this is bad news for the industry, there is also good news, as China approves licenses for 40 new Western games in the country. It is interesting that these regulations are being implemented when the revenue of the Chinese video game market increased 13% in 2023. Public comments on the rules will be allowed until January 22, 2024, so we may see further changes.
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