Chinese internet firms, including Tencent and Alibaba, have reported their first ever combined revenue decline in 2022, reports the South China Morning Post (SCMP).

The SCMP reports that combined revenue fell 1.1 percent to $217 billion (1.46 trillion yuan), in sharp contrast to the double digit growth the sector has experienced in the previous six years. The paper attributes this to waning momentum among some of the country’s biggest companies amidst worldwide economic slowdown and new regulations, including limits on play time.

China’a Ministry of Industry and Information Technology states that China’s COVID-19 regulations hit the sector particularly hard, while the SCMP states that “the industrywide fall in revenue underlines how quickly the “high growth” scenario for China’s internet industry has ended.”

Tencent had a particularly turbulent 2023, losing its status as China’s biggest company and reporting its first quarterly loss since originally listing in 2004. However, the company is predicted to bounce back this year, and has been identified as a possible partner for Blizzard following the end of its existing deal with competitor NetEase.

Weathering the storm?

China’s economy saw a notable slowdown in 2022, with three percent growth compared to eight percent in 2021. The gaming sector in particular saw notable declines, falling 19.1 percent in Q3 compared to Q2. However, the SCMP notes that companies providing information services, including game makers, reported 4.9 percent revenue growth over the year as a whole.

The SCMP further notes that the Chinese ministry has stopped releasing information on the number of apps available in China, which is noted as “a key data point that helps measure entrepreneurship in China’s data sector.” However, there was a significant decline in the number of apps reported prior to this shut down, with previous reports showing 3.67 million apps at the end of 2019 compared to 2.52 million at the end of 2021. Notably, the country imposed a freeze on new games licenses in 2021 which lasted well into 2022, followed by a marked slowdown compared to previous figures.

Despite this slowdown, Chinese authorities remains bullish about the country’s internet sector, “Noting its importance in helping to digitalise the economy and create jobs”, although the government has “yet to roll out specific new policies to support the sector.

We listed Tencent as one of the top 50 mobile game makers of 2022.