China Freezes Game Regulations, Throwing World's Biggest Gaming Market Into Chaos

Mae Love
August 15, 2018

The hold-up has battered shares of market leaders like Tencent, which have plunged since the company said it had been ordered to remove hit game "Monster Hunter: World" from sale, only days after its debut.

China has one of the world's most stringent approval processes for video games, an extension of Beijing's obsession with maintaining control over online content so it can root out dissent and other ideas it considers undesirable, from sex to graphic violence.

Lau said the company had secured approval to charge for at least 15 games before the freeze at China's General Administration of Press and Publication, providing an income buffer.

A Tencent spokeswoman did not immediately respond to a request for comment.

"For new game approvals, there will continue to be a drag", Alicia Yap, a Citigroup internet research analyst told Bloomberg.

Bloomberg News reported on Wednesday that China had stopped approving any new mobile games as part of a wider shake-up of the market.

They could choose to continue playing but there would be no guarantee the service would continue, it said.

Revenue rose 30% to 73.7 billion yuan, but that again fell short of analysts' estimates for 77.7 billion yuan.

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Currently, there's no clear leadership within these departments, and the bureaucrats are reluctant to take any risks allowing new products onto the market.

A crackdown by the Chinese government on online content has also spilled over to gaming, with the industry accused of fostering addiction. The stock has slid more than 17% this year, while New York-listed rival Alibaba remained mostly unchanged.

Quoting unnamed sources, Bloomberg said approvals for online, console and mobile games have been stalled for months by regulatory personnel changes linked to President Xi Jinping's ongoing consolidation of power, leaving developers stranded.

Shares of Tencent have declined 17 per cent this year in Hong Kong, nearly double the 8.7 per cent decline in the benchmark Hang Seng Index.

He said the block follows concern over Tencent's ability to monetise popular game PlayerUnknown Battleground (PUBG), which it was forced to alter past year after the regulator branded it too gory and violent.

It sounds like the last few years have been somewhat rocky for Riot Games and Tencent. Tencent also does not have permission to monetize the mobile version of "PUBG", for which it has 170 million installations.

Tencent's second-quarter results, due to be published after trading closes Wednesday, will be closely scrutinized for any regulatory impact on the company's finances and any commentary on its future direction. Mobile gaming revenue jumped 19% year-over-year, making for a sequential decline of 19%.

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