China Approves Online Game Licenses

After new curbs on online gaming wiped tens of billions off shares in game makers like Tencent, Beijing has signalled that it may be softening its stance. It has licensed 105 domestic games this year, including titles from industry leaders Tencent and NetEase.

CADPA, the trade body representing video game publishers, said on Monday that the approvals show authorities’ “clear support” for the industry.

105 Games Approved

The approvals are the second positive signal for the video game industry in three days. On Saturday, the NPPA sought to ease concerns about new draft rules that sent stock prices plummeting, saying it would revise them after listening to feedback from experts and other stakeholders.

The 105 games approved by the regulator this week include some from major gaming companies like Tencent Holdings and NetEase, which saw their stocks lose tens of billions in market value after the proposed curbs were announced last Friday. According to the semi-official trade association CADPA, the approvals “strongly demonstrate authorities’ clearly supportive stance on online game development.”

The group hopes that member units will use this opportunity to launch more high-quality products and promote the healthy development of the online gaming industry, contributing to promoting cultural prosperity and development and building a culturally powerful country. CADPA also cited a 2023 China Game Industry Report that showcased sales revenue for the sector reaching 300 billion yuan ($42 billion) and gamers totalling 668 million.

Tencent’s Counter War: Future

Tencent is a Chinese tech giant with a broad portfolio of interests ranging from online games to movie-making. But the company is best known for its messaging app, WeChat, which has over a billion users worldwide.

Proposed guidelines aimed at curbing online gaming caused share prices of video game makers like Tencent and Netease to plummet, causing losses of tens of billions of dollars. The draft regulations disapproved rewards for daily logins and other revenue-generating practices.

The NPPA’s approval of 105 new games is a positive sign for the industry and may signal a shift in Beijing’s stance on video game restrictions. However, investors will likely remain cautious until the NPPA receives feedback on its new rules. This will determine whether the new policy will be effective. If it is, then investors in major game developers should see a rebound in their shares. If not, it could mean renewed crackdowns on the industry. Earlier this year, China limited children’s time spent playing video games.

NetEase’s Firefly Assault

After a long freeze in new game approvals, China’s National Press and Publications Administration (NPPA) is once again licensing games. Its December list includes titles such as Tencent’s Counter War: Future and NetEase’s Firefly Assault, a survival shooter set in the fictional universe of the same name.

The NPPA’s move comes after draft guidelines proposing curbs on online gaming sent share prices of video game makers like Tencent and NetEase plunging last week, with losses dragging down Chinese stock benchmarks. The new rules disapprove of incentivizing daily logins and wallet top-ups to encourage excessive gameplay.

Despite the gloomy market response to the proposed new regulations, analysts believe they’ll have a minimal impact on video game play’ monetization. That’s why NTES shares bounced back Tuesday after falling sharply Friday. Meanwhile, investors in other video game stocks like Bilibili and Huya sank to multi-year lows. Those companies may have more reason to worry about potential crackdowns in the future, though.

CADPA’s Statement

China’s video games watchdog has announced a new age-based rating system, the latest sign that Beijing is stepping up regulations on what is now the country’s largest entertainment industry. The China Audio-Video and Digital Publishing Association, a government-backed industry group, revealed the new standards at the Chinese Games Industry Annual Conference in Guangzhou on Dec 16.

The guidelines divide games into three age categories ei: light (green), 12 (blue) and 16 and older (yellow). They require developers to display the ratings on their website, registration page and login screen.

The new standard, which has not yet been fully implemented, will also help protect minors by restricting how long they can play games and limiting the amount of money they can spend on them. However, experts say the new system won’t solve China’s gaming addiction problem.

Beijing’s crackdown on gaming caused a $80 billion rout last week in shares of Tencent and NetEase. But the approvals of 105 games on Monday suggest that the industry is back in regulators’ good graces.