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Business

China controls damage after video game rules trigger $80 billion collapse

Residents of Tianjin, China play games on their phones outside a shopping mall.
01/10/2017

  • China’s video game regulator announced new draft rules for online games last week.
  • The announcement sparked a selloff in gaming stocks.
  • The regulator said on Saturday it would seriously study all comments to improve its draft rules.

China appears to be fearful of its new restrictions on online gaming after an $80 billion market sell-off.

Chinese authorities on Friday announced new draft rules aimed at limiting the amount players can spend and restricting rewards that encourage them to spend more time online.

The announcement came out of nowhere, scared investors and sent markets into a tailspin.

Gaming giant Tencent saw its share price fall by up to 16% while that of its rival NetEase fell a record 28%. Shares of social media service Bilibili, popular with gamers, fell 14%.

These three stocks alone lost more than $80 billion in market value Friday after China’s announcement, according to Bloomberg calculations.

Online gaming stocks listed as far away as the United States and Paris also fell following the news.

Investors appeared to fear a resurgence of a harsh crackdown on the tech sector that began in late 2020 and continued through mid-2023. The crackdown has weighed on China’s economy, which has struggled to make a convincing recovery after nearly three years of intermittent pandemic lockdowns.

The regulator in question – the National Press and Publication Administration of China – seemed to backtrack on its harsh intentions quite quickly.

The next day, he began seeking to appease the industry, saying in a statement SATURDAY note that it would seriously study the industry’s reaction and improve the draft rules.

On Monday, the regulator announced it had approved 105 new online games – a likely sign that Beijing is easing its latest restrictions.

The approval list demonstrates the authority’s “active support for the development of online games”, the regulator said in an official WeChat statement on Monday.

The crackdown on online gaming in China is not new. In 2021, Beijing banned under-18s from playing during the week. This also limited them to 3 hours of play on weekends. This move was aimed at reducing addiction to video games.

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