Shares of major Chinese tech giants experienced a substantial decline in Hong Kong on Friday following the introduction of new regulations by Beijing aimed at curbing online spending in the gaming industry, as reported by Reuters.
This move is part of a broader crackdown by China on its massive online gaming sector, with authorities seeking to address concerns about a perceived rise in gaming addiction among young people.
In August 2021, China implemented restrictions barring individuals under the age of 18 from playing online games on weekdays and limiting their playtime to three hours on most weekends.
The latest regulations, outlined in a draft by the National Press and Publication Administration, mandated spending limits in online games. Additionally, measures within games that encourage high spending, such as daily login rewards, are slated to be banned, as per a report by CNN.
The proposed draft also prohibits in-game activities that could lead to the trading of virtual goods at inflated prices, including auctions. Large tips to players during live streamed games are also set to be banned.
The draft rule further emphasizes that games should only allow real-name registration for players, and game publishers must store data locally.
Online in-game purchases, which have become a lucrative aspect of the gaming industry, especially for mobile games often offered free to consumers, will be significantly impacted by these regulations.
The regulatory landscape reflects the Communist Party’s ongoing campaign since 2020 against a private sector perceived as accumulating excessive power and expanding recklessly, posing a potential threat to the control of the world’s second-largest economy.
This move is part of a larger regulatory campaign initiated by Beijing in late 2020, targeting what the government perceives as overly powerful companies, particularly in the Big Tech sector, according to the CNN report.
The regulatory landscape reflects the Communist Party’s ongoing campaign since 2020 against a private sector perceived as accumulating excessive power and expanding recklessly, posing a potential threat to the control of the world’s second-largest economy.
The cumulative effect of these measures has resulted in a staggering loss of over $1 trillion in market value from Chinese companies globally, causing ripple effects throughout the broader economy.
Despite signs of a potential easing of the regulatory clampdown as China’s economic outlook deteriorates, Friday’s market sell-off saw Tencent, a major player in the gaming industry, experience its biggest intraday fall since 2008, sliding by as much as 16 per cent. NetEase Inc., another significant player, witnessed a record 28 per cent dive, while Bilibili Inc., a social media service popular among gamers, fell by 14 per cent, as reported by Bloomberg.
Collectively, the three stocks lost as much as $80 billion in market value on Friday, with Tencent alone shedding over $50 billion, as per the Bloomberg report.
Yang Junxuan, a fund manager at Shanghai Junniu Private Fund Management Co. told Bloomberg about the impact of these gaming curb measures on companies’ earnings. “The government gaming curb measures will hurt gaming companies’ earnings,” he said. However, he went on to highlight the broader concerns people have, like fears of further measures targeting the sector, similar to the actions taken against the education sector, a few years ago.
(With inputs from agencies)
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