On Thursday, December 21sth, China’s regulatory authorities introduced new rules to curb spending and incentives in the video game industry, causing significant financial losses for major gaming companies. The regulations, which set spending limits for online games, prohibit rewards for daily logins, first-time spending, and consecutive spending, common mechanisms in the gaming industry. The regulations aim to address concerns about gaming addiction and in-game spending. Besides banning certain features, games must now set limits on in-game wallet top-ups. While industry insiders anticipate a negative impact on daily active users and revenue, there is optimism about an obligatory, only 60-day approval process for new games.
This move led to a collective loss of nearly $80 billion in market value for China’s top gaming companies, Tencent and NetEase. Tencent’s shares dropped by as much as 16%, and NetEase experienced a 25% plunge. The impact extended globally, affecting tech investor Prosus and gaming stocks worldwide.
China’s tightening grip on the gaming industry began in 2021 with playtime limits for minors, and the new rules mark the most explicit effort to control in-game spending. Despite the challenges, China’s gaming market returned to growth in 2022, with a 13% increase in domestic revenue. The regulations also highlight Beijing’s focus on user data security, requiring game publishers to store servers within China. The industry faces uncertainty, and global gaming stocks experienced declines in response to the news.
