China is set to introduce new regulations that will limit the amount of money and time people can spend on video games. The aim is to curb in-game purchases and prevent excessive gaming behavior. This move is a blow to the world’s largest online gaming market, which is still recovering from a previous crackdown. The news caused tech giant shares to plummet and wiped off billions of dollars from their value. The planned restrictions also reinforce a ban on “forbidden online game content that endangers national unity” and “endangers national security or harms national reputation and interests”. Beijing initially took action against the gaming sector in 2021 by limiting online gaming for players under 18 to one hour on Fridays, weekends, and holidays. However, the new regulations go further by prohibiting rewards that encourage excessive play and spending. Pop-ups warning of “irrational” playing behavior will also be implemented. The impact of these restrictions is significant as China is the largest gaming market globally, with Tencent being the revenue leader in the sector. Tencent’s share price dropped by 12.4% following the announcement. Other companies, such as NetEase and Prosus, also experienced significant losses. The proposed regulations could potentially affect monetization models and require restructuring of games. Smaller gaming companies may struggle to recover from this blow, while larger companies like Tencent and NetEase are expected to bounce back in the long run. The new rules may also expedite the approval process for games in China and require game publishers to store user data within the country. Public comments on the proposals are being sought until January 22nd.
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