China Proposes Stricter Regulation on Online Gaming, Major Stocks Plunge

On December 22, the National Press and Publication Administration of China released a draft of “Network Game Management Measures” for public consultation. The draft proposes that online games should not incentivize players with rewards for daily logins, initial top-ups, or continuous recharges. It also mandates that all online games must set a limit for user recharges.

This announcement has sent shockwaves through the Chinese gaming industry. Although the measures are still in the consultation phase, if enforced, they could significantly impact gaming companies and their profitability.

Following this news, Hong Kong-listed gaming stocks, including NetEase and Tencent, experienced significant declines. As of Friday late afternoon, NetEase‘s shares fell by over 23%, Tencent Holdings by over 13%, and Bilibili by over 10%. Other gaming stocks also saw declines of more than 10%.

The draft measures specifically mention the need to restrict excessive use and high expenditure in games. They also prohibit online game publishers and operators from encouraging or condoning the high-priced trading of virtual items. All online games must set a user recharge limit and disclose it in their service rules. They must also provide pop-up warnings for irrational consumer behavior.

The draft also places significant emphasis on the protection of minors. It states that the provision of paid services to minors should be strictly limited, and the amount that minors can spend on these services should be reasonably restricted. It further prohibits the provision of random draw services to minors and the tipping of minors in online game broadcasts.

According to the “2023 China Game Industry Report”, released on December 15 at a gaming industry annual meeting, the actual sales revenue of China’s gaming market in 2023 exceeded 3029.64 billion yuan, a year-on-year increase of 13.95%. This marked the first time that revenue surpassed the 300 billion yuan milestone. The number of Chinese game users also reached a historical high of 668 million.

Despite China’s efforts to curb minors’ addiction to games, the “2023 China Game Industry Minor Protection Progress Report” showed that in 2023, 15.41% of parents still encountered their children secretly recharging their gaming accounts. Over 70% of parents’ refund requests were processed, with nearly 40% fully refunded.

On the evening of Friday, Tencent responded the news to domestic media outlet Yicai that currently, the gaming time and spending data of minors are at a historical low. Tencent believes the new “Management Measures” draft does not fundamentally alter the reasonable business model of gaming companies. Tencent also appreciates the regulatory department’s supportive attitude towards the industry, especially its guidance on encouraging high-quality original games, and that Tencent will continue to adhere to a strategy of technological innovation and cultural leadership, promoting high-quality development in China’s gaming industry with the support of the regulatory authorities

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