Tencent, NetEase stocks rebound after Chinese regulator softens crackdown on online gaming
China's new rules to reduce spending on video games create panic among investors, wipes off $80 billion Draft rules that curb spending and use rewards that encourage playing video games were published on December 22, raising concerns that regulators were once again cracking down heavily on the sector. Contradicting its previous stance, China's video game regulator - the National Press and Publication Administration, came up with a more conciliatory tone, saying it would improve the rules by "earnestly studying" public views.
The development came soon after the dramatic tumbling of gaming stocks. It then approved new licenses for 105 domestic online games for December - more than the average month.
"We believe these fire-quenching measures may help to slightly ease market concerns, but they are not enough to remove the overhang caused by the draft regulation," Nomura analysts wrote in a note to clients, according to a report by Reuters. The industry has just started to regain its growth this year following the end of an extended clampdown in 2021 and 2022.
Earlier this month, Blizzard China, the company's Chinese subsidiary, published a post, saying that it is in talks with publishing partners in China to continue the game's service in the country. The proposed regulations, currently open for public feedback until January 24, aim to prohibit online games from rewarding players for daily logins, initial in-game spending, or consecutive spending.
These reward mechanisms are commonly employed in online games. While the announcement caught the industry and investors by surprise, it aligns with the ongoing efforts of Chinese authorities to address issues such as myopia, internet addiction, and gaming addiction among the youth.
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