Tencent and NetEase can only offer online gaming to minors on Fridays, weekends and holidays from 8:00 PM to 9:00 PM (00:00 AM to 01:00 AM GMT).
China will limit the amount of time children can play video games to just three hours in most weeks, a dramatic escalation of restrictions that dealt a blow to the world’s largest mobile gaming market as Beijing indicated it would continue a campaign to expand the control the expansion of large technology companies. businesses.
Gaming platforms from Tencent Holdings Ltd. to NetEase Inc. can only offer online gaming to minors from 8 p.m. to 9 p.m. on Fridays, weekends and holidays, the state news agency Xinhua reports, citing a release from the National Press and Publication Administration. The new rules are a major improvement over an earlier restriction in 2019 of 1.5 hours per day on most days.
The escalating restrictions on the lucrative gaming business are likely to deter investors who in recent days had cautiously returned to Chinese stocks and explored bargains after a series of regulatory investigations in areas from online trading to data security and ride-hailing triggered a trillion-dollar sell-off in the past months.
“This ruling is the strictest yet and will essentially wipe out most of the minor spending, which we believe was already extremely low,” said Daniel Ahmad, an analyst at Niko Partners.
Later in the day, Beijing indicated that its efforts to contain major tech companies will continue. A top-level committee headed by President Xi Jinping said efforts to prevent the “disorderly expansion of some platform companies” had been a success, while also promising “greater transparency and predictability” in policy setting, Xinhua said.
Xi also told the meeting that anti-monopoly policies were a requirement to improve China’s economy, Xinhua reported.
NetEase fell a whopping 9.3% in pre-market trading in New York, while Prosus NV, Tencent’s largest shareholder, fell in Europe.
“Three hours a week is too tight. Such a policy will also have a negative effect on Tencent,” said Steven Leung, Executive Director at UOB Kay Hian (Hong Kong) Ltd. “I thought the regulatory measures would gradually take a break, but it doesn’t stop at all. It will certainly hurt the nascent tech rebound. ”
Tencent and other companies have said children make up only a fraction of their businesses, especially after recent restrictions. The country’s largest games company has said its minor revenues make up less than 3% of its gross gaming revenues in China.
Other key points in the new rules include:
- All online games must be linked to a state anti-addiction system, and companies cannot provide services to users without real name registrations
- Regulators will monitor how gambling companies apply restrictions on things like game time and in-game purchases
- Regulators will work with parents, schools and other members of society to combat game addiction in young people
The new rules underscore the extent to which Beijing plans to curb youth gambling and push its future workforce toward more productive occupations. Earlier this month, the state media ran strong critiques of the industry, at one point calling games “spiritual opium.” That description was later removed, but stock prices collapsed out of concern for further restrictions.
What Bloomberg Intelligence says
Tencent, NetEase and other online game companies in China may face only a modest blow to financial performance from the tightening of time restrictions on the time minors spend playing games up to three hours a week…rolling out compliance measures.
– Matthew Kanterman and Tiffany Tam, analysts
Tencent, which struggled with widespread gaming industry crackdowns in 2018 and 2019 and then targeted myopia in children, is also grappling with a plethora of stricter regulations in areas such as social media, online finance and commerce.
It has proactively reduced the number of hours minors can play its games, but the company was nowhere near as restrictive as the government’s new rules. It limited minors to just one hour during weekdays and no more than two hours during holidays and public holidays.
“Since 2017, Tencent has researched and applied several new technologies and features for the protection of minors,” Tencent said in a message-by-post. “It will remain so as Tencent strictly adheres to and actively implements the latest requirements from the Chinese authorities.”