2023-12-23 22:45:02
China’s state regulator of the online gaming industry on Friday published draft regulations seeking to curb practices that encourage players to spend more money and time online. The stock market has responded with a drastic fall in the shares of the main Chinese companies in the sector, such as Tencent Holdings and NetEase.
These two technology companies and the operator of a social networking service popular among gamers, the company Bilibili, together lost $80 billion of their capitalization in a matter of hours, Bloomberg highlights. Tencent Holdings fell 16%, marking its biggest 24-hour drop since 2008. Meanwhile, smaller rival NetEase suffered a 28% plunge, hitting a record high. In turn, the Bilibili company suffered a 14% drop.
youth health
The main argument for imposing the restrictions is the Government’s concern for the health of Chinese youth. Addiction to games and online entertainment are perceived to be responsible for an increase in myopia among young people. Additionally, Chinese users spend on average more time online than in many other countries.
In August 2018, President Xi Jinping paid attention to the problem of high incidence of myopia in the population, pointing out that it is increasingly diagnosed in the youngest, while seriously affecting the physical and mental health of children. The Chinese leader emphasized that the entire society must take measures to protect the eyes of minors “so that they can have a bright future,” Xinhua reports.
Addiction to games and the Internet has also worried Chinese authorities for years, who have created multiple clinics that combine therapies to rehabilitate those with so-called ‘gaming disorders’. About 62.5% of Chinese minors usually play online and 13.2% of underage players spend more than two hours a day on this activity.
Developer and investor concerns
The extensive restrictions announced took national industry players and investors by surprise on the last trading day on the stock exchanges before Christmas, according to the media’s analysis. Shares of Tencent, Prosus NV and Naspers Ltd. then sank on European stock exchanges.
A group on the WeChat messaging service that unites hundreds of developers and designers points out that this community perceived the new regulations as dangerous for their income, but also vague and confusing, since they intend to put a limit on the spending of players, but do not. they specify it. In a separate WeChat broadcast, Tencent investors and employees called the regulations irrational and uncalled for.
Investment company Forsyth Barr Asia senior analyst Willer Chen found it especially discouraging that the announcement came “following a year that has already been so difficult for the market.” According to Bloomberg, confusion in the sector grew even more this Friday due to the approval by the same state regulator of 40 new online game titles for distribution in China.
The authors of a report by the Games Working Committee and the China Audiovisual and Digital Publishing Association presented in the middle of this month expected stock market growth on the part of the games market that might reverse last year’s decline. Now, the CEO of one of the market’s companies, Steven Leung, estimates that with the new rules, “investors might simply abandon the market completely, because the political risk is too high.”
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