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Can the Chinese mobile gaming industry bounce back in 2023?

With the end of zero-covid and other regulatory restrictions, can the Chinese mobile gaming industry come back to prominence?
Can the Chinese mobile gaming industry bounce back in 2023?
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As 2023 begins, a gloomy year for the Chinese mobile gaming industry passes into the rear-view mirror. We already covered the difficulties China faced last year here but things change rapidly in the modern world. Over the last week we’ve seen a number of stories pop up, suggesting gaming giant Tencent will bounce back in 2023 and how both they and NetEase are resurrecting older games to make up for shortfalls in deals with Western companies. Overall, it is looking up for mobile gaming in China, in the broadest possible sense. However, there are still some wrinkles to overcome.

Manufacturing problems

China is a major centre for tech, including the making of mobile phones. Apple’s valuation took a major hit over the Christmas period, which saw many wondering whether or not it was to do with issues in China’s manufacturing sector which they utilise heavily. The reported news that Apple is set to diversify their manufacturing pipeline means that other countries will be getting a taste of the investment Apple has given China.

While this is unlikely to set back the mobile gaming industry directly, it may shake investor confidence in China’s tech sector. That may have a further knock-on effect to the mobile game industry specifically.

The gaming restriction hangover

While it was good news that the gaming licence freeze came to an end, it may be a while yet before the market reaches the heights it was once at. That raises the question of how long this will take, and whether or not it can do so in a timely manner. For many giants such as Tencent and NetEase that have the resources to weather the storm, this may not be a problem, however as we’ve previously observed many smaller companies may fold in the meantime.

As zero-Covid restrictions were lifted and the Chinese regulators have claimed that they have ‘solved’ the problem of youth game addiction which sparked greater pressures. This and their increased courting of the game industry may indicate a coming warmth towards the industry that reverses years of restriction.

Covid restrictions internationally

The restrictions on international travel by Chinese citizens may, in-fact not impact the mobile gaming industry. Already before the pandemic much of the development process was handled domestically, and this would only move further online during the pandemic. However, it may indeed have an effect on these companies' international presence and networking to some degree. Although not likely enough to have a major impact.

Standing apart from the pack

One key story was the relationship between NetEase and Blizzard collapsing. As the latter would not conform to an agreement with NetEase who had been managing their games such as Starcraft, Overwatch and Hearthstone. This was a considerable blow to the company at the time. However, with NetEase acquiring former Microsoft partner-studio Skybox, some have observed this may indicate closer ties to the Western software giant. Ties that, if the Activision-Blizzard acquisition takes place, would maybe herald a return of this deal if not further collaboration going forwards.

Regardless, it may be a learning moment for NetEase, wherein the possibility of losing lucrative licences and partnerships with Western studios becomes very real. Possibly encouraging them to be more cautious in future and invest inwardly rather than outwardly.

A reason to be optimistic

Overall however, the future of the mobile gaming industry in China is far from certain, for the better. At the end of 2022 before the lifting of restrictions and loosening of regulations, it did indeed look bleak. However, some commentators such as Kim Soares have been much more optimistic about 2023, suggesting that the post-covid slump the gaming industry as a whole has faced may be coming to an end.

For better or worse, China is one of the last countries to come out of Covid restrictions. With them doing so, for many it will seem as if that era is over. Whether or not the disease recedes or remains lurking in the background, the intent from world business seems to be to ‘get back to normal’. With eyes on China, it is very likely that will encourage a more positive outlook and investment in the near future.