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China's latest gaming crackdown: What's new and what it means for mobile's biggest game makers

The introduction of spending limits and bans on everything from regular login rewards to gacha gaming mechanics have thrown China's gaming giants into chaos
China's latest gaming crackdown: What's new and what it means for mobile's biggest game makers
  • The new restrictions are designed to prevent “obsessive gaming behaviour”
  • This latest crackdown on gaming within China has swept away billions in stock market value for the country's biggest players
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Just when it seemed that China was going softer on its own resident game makers, upping the amount of titles they could release and returning a glimmer of the past glories that had put them on top globally, the tide has changed and new Chinese "anti-gaming" regulation is set to go in harder than ever.

On December 22, 2023 proposed new restrictions were unveiled by the Chinese regulator designed to limit in-game purchases and prevent “obsessive gaming behaviour”. Most notably, industry standard incentives such as rewards for regular logins, first-time purchases and topping up of account balances would be made illegal, with more nebulous threats such as enforced pop ups to warn players of "irrational playing behaviour” set to be introduced.

Furthermore games will be no longer allowed to offer probability-based lucky draw features to minors – ending the loot boxes and gacha monetisation seen in hundreds of games – and publishers will have to enforce limits on how much money can be spent in game and will be banned from enabling the auction or speculation of in-game items.

Game over. Again

Needless to say, after enjoying the green shoots of recovery after bending to previous restrictions, this new, seemingly more intensive crackdown on gaming within the country has swept away billions in stock market value for the country's biggest players. Reuters reported that Tencent shares fell as much as 16%, while NetEase shares dropped by as high as 25%.

The main source of the problem is the level of uncertainty that the new rules bring into play. Their aim is to "safeguard and promote the healthy and prosperous development of the online gaming industry," the National Press and Publication Administration said and ban "forbidden online game content that endangers national unity" and "endangers national security or harms national reputation and interests". All of which leaves precisely which in-game actions and what kind of gameplay is now illegal, entirely open to debate.

As such all Chinese game makers risk expensive development and launches that could instantly fall foul of the new rules if the government’s adjudicator deems that they have done so. The result is that China’s games developers are now in stasis, unable to continue to do business and make good on future plans, with the threat of further regulation and legislation potentially coming at any point in the future.

AKA not the kind of business that any investor would like to sink their money into.

The new rules are planned to be introduced some time after January 22, 2024, a date which marks the closing of a consultation period giving developers and publishers just one month to state their case and ensure that their games don't fall foul of the new legislation.

RIght now clause 64 of the draft leaves the effective month and day for the new legislation to kick in as ‘X’ and ‘XX’ respectively.

It's all to play for…

Perhaps aware of the panic their plans have caused, it seems that the Chinese government is at least willing to listen and work to clarify precisely which in-game actions and monetisation methods will cause problems.

It's a glimmer of good news for Chinese games devs that the regulator has now promised that it will "earnestly study expressed concerns and views" with a view to potentially amending the rules after considering opinions from government bodies, companies and users and that "soliciting public views for the rules is a process aimed at listening to opinions more broadly, and improving the provisions of the rules.”

As to how effective any counter-offer may be or how the proposed regulations may be altered, it’s safe to say that the Chinese games industry and investors globally are currently holding their breath.