CCP Calls for Online Video Game Regulation, Re-Ignites Investor Fears
Chinese online video game firms have recently seen their share price take a beating due to the Chinese government calling online video games "electronic drugs" while calling for its regulation.
According to the state-run Economic Information Daily, the Chinese government claims that online video gaming has a negative impact on students and young adolescents. It also said that games like Tencent's "Honour of Kings", also known as Arena of Valour in the West, and other similar games are "spiritual opium", and thus called for regulations to lessen the time and money spent on such games.
"No industry, no sport, can be allowed to develop in a way that will destroy a generation," the publication said.
This recent call of the Chinese government for online video gaming regulation caused a significant share price drop for companies in the industry. Tencent, whom the Chinese government shone the spotlight on, saw its stocks plummet by more than 10% in early trade, resulting in almost US$60 billion wiped from its market capitalisation before a slight recovery. Tencent's gaming competitors fared worse as NetEase Inc and GMGE Technology Group Ltd's stocks plunged by as much as 15% and 13.59%, respectively.
Foreign game companies were also affected by the calls for regulation. Electronic Arts, the company known for its monetisation scheme and games like The Sims, the latest Star Wars Battlefront 2 and FIFA 2021, saw its stock price go down by 2.8%. Activision Blizzard, the company behind Overwatch and Warcraft 3: Reforged saw a 3.8% drop.
In response to the government's call for regulation, Tencent announced that it would introduce measures in "Honour of Kings" to prohibit children under 12 years old from spending money and excessive time on the game. However, this could be a difficult prohibition to enforce as children could input a fake age to get full access to the game. The company also said that they will eventually add these new restrictions to all their games in the foreseeable future.
This isn't the first time the Chinese government has called for regulation for video games. In 2017, the Chinese government wanted to place a limit on the time minors could spend playing video games. Tencent, and other Chinese gaming companies, responded with an anti-addiction system in their games to "cap minors' game time".
However, the Chinese government's recent focus on protecting child wellbeing and its current drive to regulate the country's tech industry has led to this new call for regulation. You may recall that Tencent became the target of China's State Administration of Market Regulation (SAMR), which planned to block two of Tencent's business ventures.
This renewed call for video game regulation worries investors, who think that the Chinese government's efforts on remaking various industries in the country appear to place common prosperity over helter-skelter growth.
Ether Yin, a partner at Trivium, a Beijing-based consultancy, mentioned in a Reuters report that the Chinese government thinks that nothing is off-limits and "will react, sometimes overreact" to anything that fits the ongoing crackdown on the tech industry on state media.
Written by John Paul Joaquin