China's new rules to reduce spending on video games create panic among investors, wipes off $80 billion

livemint.com:

Reuters report, nearly $80 billion was wiped off from the market value of from China's two biggest gaming companies. The government of China has decided to prohibit online games from bestowing rewards upon players for routine daily logins, inaugural financial transactions within the game, and successive instances of spending.

These particular reward mechanisms, which have become widely employed in the domain of online gaming, are now subject to restrictions aimed at fostering a more balanced and equitable gaming environment. "It's not necessarily the regulation itself - it's the policy risk that's too high," said Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong.

"People had thought this kind of risk should have been over and had started to look at fundamentals again. It hurts confidence a lot." The decision to impose restrictions on video games didn't go well with the investors as the shares of gaming companies witnessed a deep dive.

The scrips of the world's biggest gaming company, Tencent Holdings plunged 16% and similar was the case with NetEase as its shares were trading 25% down on Friday. Tencent management, however, kept the optimistic tone around the new regulations with its vice president Vigo Zhang saying the company “will not need to fundamentally change its reasonable business model or operations for games." Over the years, Beijing has adopted a progressively stringent stance toward video games.

In 2021, China implemented stringent time restrictions for individuals under the age of 18, and there was an approximately eight-month suspension of approvals for new video games, attributing these measures to concerns related to gaming addiction. While the formal crackdown