China to increase curbs on video gaming industry

Customers furious after HSBC down for more than 24 hours

China is set to introduce new regulations that will restrict the amount of money and time individuals can spend on video games.
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These measures aim to control in-game purchases and prevent excessive gaming behavior.
The proposed legislation is a setback for the world's largest online gaming market, still recovering from a previous crackdown.
The announcement led to a drop in shares of major tech companies, wiping off tens of billions of dollars from their market value.
The planned restrictions also reaffirm a ban on "forbidden online game content that endangers national unity" and "endangers national security or harms national reputation and interests."
Beijing first took action against the gaming sector in 2021, limiting online gaming for individuals under 18 to one hour on Fridays, weekends, and holidays.
However, the latest set of restrictions goes even further.
Online games must not offer rewards that encourage excessive play and spending, including those for daily logins and topping up accounts with additional funds, stated the industry regulator, the National Press and Publication Administration (NPPA).
"The removal of these incentives is likely to reduce daily active users and in-app revenue and could eventually force publishers to fundamentally overhaul their game design and monetization strategies," said Ivan Su, an analyst at Morningstar.
Pop-ups warning users of "irrational" playing behavior are also set to be implemented.
Knock-on Effect
China is the world's largest gaming market, with Tencent leading globally in terms of revenue. The company dominates the Asian market and has invested in game studios worldwide.
Following the NPPA announcement, Tencent's stock price fell by 12.4%.
Tencent Games' vice president, Vigo Zhang, stated that Tencent would strictly implement any new regulatory requirements. The new draft rules have not deviated from regulators' ongoing focus on ensuring companies have "reasonable business models and operating cadence," he said.
He added that minors have been spending historically low levels of money and time on Tencent's games since 2021, when the protection of younger players became a focus for Beijing.
Shares in rival NetEase, which has not yet commented on the proposals, were down more than 24%.
Shares of Dutch tech investor Prosus lost more than 14%. Prosus's stock performance is closely linked to that of Tencent, its largest investment in a diverse portfolio of technology stocks.
The shockwaves were felt throughout Hong Kong's Hang Seng Index, which dropped more than 4% at one point and was down 1.7% by the close of trade.
Gaming consultant Daniel Camilo told the BBC that both Tencent and NetEase have many free-to-play games that are "pay to win," where gamers are "actively incentivized to spend money on their games."
The restrictions could affect these types of "monetization models," which would then have to be restructured, and "some of the games might actually have to be pulled out from the stores," he said.
However, Mr. Camilo believed that both Tencent and NetEase would recover in the long run. The same cannot be said for smaller gaming companies.
"If a small company is affected in a few millions, then it might mean that they have to close their doors," he said.
"2023 has been a year full of layoffs and a lot of struggle, particularly for the gaming industry in China. So, this is kind of a severe blow, I would say, especially for the medium and smaller publishers."
The government's new gaming rules could also potentially expedite the process of approving games in the country by requiring regulators to process approvals within 60 days.
Game publishers would need to house their servers processing and storing user data in China, rather than elsewhere.
According to Reuters, the administration is seeking public comment on the proposals by January 22.

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