Earlier Tuesday, shares of several gaming companies, including Tencent, fell sharply to 11% in Hong Kong markets after the Communist Party of China's Propaganda Department announced at the ChinaJoy expo that the video games had to be "good, clean and safe." Shares of companies like Tencent, NetEase and XD began to fall in response. Shares of China Mobile Games and Entertainment Group (CMGE) even fell a whopping 20%.
Several video game companies from other Asian countries, including Japanese giants Capcom, Konami and Nintendo, were also successful, but not to such an extent. While at the time of writing, Tencent shares have recovered to -6%, the company has lost a total of $ 110 billion since the beginning of last week.
Lately: stocksChina gaming stocks are falling freely today. NetEase has fallen 15%. Tencent is down 9%. Bilible about 9.5%. XD down 18%. It comes after the Chinese Communist Party Propaganda Department told #ChinaJoy that games should be good, clean and safe. pic.twitter.com/7uHeDhqP1aAugust 3, 2021
Shortly afterwards, a newspaper run by the official Chinese news agency Xinhua published a report calling on the spiritual opium of video games& # 39; with a detrimental effect on teens, and he specifically named Tencent as one of the main drivers of this.
The publications directed by Xinhua are considered to represent the official position of the Chinese government, but there has been some turnaround on this and the article has been deleted. However, the phrasing sounded alarming, as the report was similar to an article published in another newspaper affiliated with the Official News Agency about twenty years ago, calling games "digital heroine." . While the Chinese government is generally interested in growing its video game industry since it ended its ban on console gaming, experts report that Chinese President Xi Jinping is not a big fan of games.
I'm not sure if calling the games "opium" reflects the central government's official position, but it certainly agrees with President Xi's thinking. At the meetings of the two March sessions, Xi explicitly referred to games as a problem that needs to be “solved”. : //t.co/osmCiwQB5F https://t.co/3EngY8pfGI pic.twitter.com/9jcwGRTjEUAugust 3, 2021
To understand why a single observation caused these waves, we need to look at the influence of regulators in the Chinese gaming industry. In 2018, regulators realized the potential damage from monetization within the game and from loot boxes and suspended monetization licenses. Measures like Tencent using facial recognition to keep kids from playing all night i design 12 rules for streamers to promote "healthier environments" they are direct responses to government regulation, all in an effort to keep the game fit for children.
Companies fear angering regulators in China, as crackdowns could effectively mean the collapse of entire industries. About two weeks ago, China banned off-campus education, since education should not be a source of profit, which would lead to mass closures and job losses in the online education sector. The fear is that if regulators consider the game unsuitable for children for any reason, this could mean the end of the game, as it currently exists in China.
Tencent has done so ever since issued a statement promising to further limit the playing time of accounts registered to minors, to one hour on weekdays and two hours during school holidays and national holidays. Following a recently announced age-based rating system for gaming in China, in this statement, Tencent is now also considering banning its games for children under 12.