China’s Gaming Regulator Removes Proposed Rules Amid Market Turmoil
The gaming regulator in China has caused a stir in the gaming industry by removing proposed rules from its website that aimed to control spending and rewards associated with playing video games. The draft rules, which suggested spending limits for online games, initially led to significant market turmoil and a substantial decline of nearly $80 billion in market value for China’s two largest gaming companies, Tencent Holdings and NetEase, when they were first announced.
The link to the draft rules on the National Press and Publication Administration’s website became inaccessible on Tuesday morning after being accessible on Monday, prompting speculation about potential revisions. Analysts noted the unusual nature of this move, suggesting that it could signal further changes in the proposed measures.
Xiaoyue Hu, an analyst at Haitong Securities, mentioned in a note to clients that the removal of the announcement might indicate the possibility of “further changes in the new measures.” The NPPA has not provided an immediate response regarding the reason for the removal.
The news of the removal of the proposed rules led to a positive market reaction, with shares of Tencent Holdings and NetEase rising by as much as 6 per cent and 7 per cent, respectively, in morning trading. Both companies maintained an increase of more than 4 per cent at noon against a 2.4 per cent rise in Hong Kong’s Hang Seng Index.
The initial draft rules, which caused panic among investors, suggested spending limits for online games. However, the NPPA later adopted a more conciliatory tone, expressing a commitment to improve the rules by considering public views. Analysts had pointed out concerns about specific articles in the proposed rules, particularly Articles 17 and 18.
Article 17 aimed to prohibit video games from forcing players into combat, while Article 18 required games to establish a spending limit for players and prohibited features that incentivize spending within the game. Analysts believe that the government may remove or alter these contentious articles in the final rule.
Overall, there is a sense of cautious optimism among analysts and industry experts regarding the potential revisions to the proposed rules. Many are expecting the government to take into account public views and make necessary changes to address the concerns raised by investors, businesses, and the public.