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China Readies Tough Online Games Regulations

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Just when players and investors had begun to believe that China was finished with major new regulations to the games industry, regulators have announced proposals for more curbs. The draft regulations, proposed by the National Press and Publication Administration appear to focus on in-game spending.

The proposals revealed on Friday hit the shares of Chinese gaming giants Tencent and NetEase and dented those of other companies with operations n the Chinese market. The Reuters news agency calculated that nearly $80 billion was briefly wiped from the valuations of the two Chinese companies.

Games operators will be barred from giving players rewards if they log in every day, if they spend on the game for the first time or if they spend several times on the game consecutively. Operators will be required to set limits on how much players can top up their digital wallets for in-game spending.

The proposals also would bar minors from tipping hosts who livestream games and would stop companies from offering probability-based lottery services to under-18 users.

The proposals are open for comment until Jan. 22, 2024.

“The removal of these incentives is likely to reduce daily active users and in-app revenue and could eventually force publishers to fundamentally overhaul their game design and monetization strategies,” said Ivan Su, an analyst at Morningstar, quoted by Reuters.

The new regulations follow a series of penalties for Chinese tech companies and new regulations in gaming that were set by Chinese authorities in 2021. Citing the need to curb gaming addiction and other health concerns, these included real name identification and tough play time limits for gamers under 18. Regulators also halted the approval of new game licenses or the ability to earn revenues from games for a period of some eight months.

Tencent, which claims to be the world’s largest games company by revenue, saw its Hong Kong-listed shares plunge to close down more than 12% on Friday, at HK$274 apiece. NetEase shares finished Hong Kong trading down by 24% at HK$122.

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