China to Rethink Gaming Legislation as Tech Titans Face Financial Turmoil

Chinese officials might change the proposed rules for online games soon because these rules made big tech firms lose a lot of money.

The national TV channel, CCTV, said on Saturday that the government listened to the “feedback and views from everyone.” They also mentioned that “the State Press and Publication Administration will look into these comments closely and make more adjustments and enhancements,” talking about the media oversight body.

On Friday, the government issued a proposal containing a broad set of guidelines aimed at reducing online spending and incentives in video games.

This action had an immediate effect, causing a significant setback to the largest gaming market in the world. The reaction from investors was swift, resulting in a loss of up to $80 billion in market value for China’s top two companies, Tencent Holdings and Netease.

Under the new regulations, online games cannot offer players rewards for daily logins, making a first-time purchase, or making repeated purchases in a game. These practices are typical ways to encourage ongoing engagement in online games.

CCTV mentioned that authorities might update parts of the proposed regulations. These changes could affect rules about daily sign-ins and adding money to accounts.

Over time, China has gotten stricter on video games.

The country took its first big step in controlling the gaming industry in 2021. It introduced tight restrictions on how long minors could play games and stopped approving new games for nearly eight months. The reason was worries about addiction to gaming.

Because of strict rules, 2021 and 2022 were the toughest years ever for the Chinese gaming sector, with earnings decreasing for the first time.

Last year, China began to allow new games, but officials still aimed to reduce how much time kids play games and how much they spend on them.

The latest rules from Friday’s proposal include the harshest restrictions so far. These forbid games from having luck-based draws for young people and stop them from selling game items through auctions.

New regulations show Beijing is worried about user data. They want game companies to keep their servers in China.

This update follows a rise in China’s video game industry, with local earnings increasing by 13 percent to 303 billion yuan ($42.6 billion), as reported by the CGIGC.

The influence and size of China’s gaming leaders might change the worldwide video game industry over time.

Shares of many video game makers from the US and Europe dropped after the announcement on Friday. However, these drops were minor compared to Tencent’s 16 percent fall. 

According to Bloomberg News, the news on Friday caused Tencent’s share value to decrease by about $54 billion. The government is asking for feedback on the rules by January 22.

What do I Think?

I think the Chinese government will soon adjust the new game rules because they caused a big loss for tech companies. The national TV said the government heard people’s opinions and will make changes. 

The new rules stopped games from giving rewards for logging in or buying things, which made two big companies lose a lot of money. The government has been strict with games to stop kids from playing too much. These new rules are the toughest yet, but they might change them after hearing from people.