China Regulator Erases Draft Video Game Rules, Raising Company Shares

The gaming regulator in China, the National Press and Publication Administration (NPPA), has taken down the draft rules for video games from its website.

Reports revealed the rules no longer exist on the regulator's website as of Tuesday, January 23, spreading optimism across the gaming industry, which led to a surge in stock prices.

The rules, aimed at restricting spending and rewards related to video games, were proposed last month by the NPPA, causing market turmoil upon announcement.

China Revises Gaming Rules

The NPPA's website no longer provides access to the draft rules as of Tuesday morning, following its availability on Monday. This unexpected move has been described by analysts as unusual, sparking speculation about a potential revision.

The consultation period for the rules, which had initially rattled investors and wiped off nearly $80 billion in market value from China's top gaming companies, concluded on Monday.

Following this event, Tencent Holdings, the world's largest gaming company, and its closest rival recorded a significant boost in their shares, rising by as much as 6% and 7%, respectively, in morning trading.

Even at noon, both companies' shares remained up more than 4%, surpassing the 2.4% increase in Hong Kong's Hang Seng Index. Notably, the draft rules proposed measures such as spending limits for online games.

This raised concerns about potential regulatory changes, which impacted investor confidence during a time when the government sought to stimulate the economy through private-sector investment.

Meanwhile, analysts had noted the risk associated with the proposed rules, particularly highlighting Articles 17 and 18. Article 17 aimed to ban video games from forcing players into combat, confusing an industry where combat is a fundamental aspect of many multiplayer games. Article 18 required games to set spending limits for players and prohibited features encouraging in-game spending.

Following the initial market reaction and concerns, the NPPA adopted a more conciliatory tone, expressing a commitment to improving the rules based on public feedback.

Importantly, the removal of the draft rules from the website is seen as a significant development, and analysts suggest it may signal further changes in the regulatory approach.

China Gaming Rules Extend to Minors

Over the years, Chinese officials have been working to regulate the amount of time youngsters devote to online gaming in their efforts to combat internet addiction." While they note success in addressing the issue, they remain watchful.

As far back as 2019, the government imposed some restrictions that limited minors to a daily 90-minute gaming window on weekdays and prohibited gameplay between 10 pm and 8 am.

In 2021, more stringent measures were introduced, which permitted minors to just one hour of online gaming per day, exclusively on Fridays, weekends, and public holidays.

Meanwhile, the recent move comes in the context of China's ongoing efforts to balance regulatory measures in the gaming industry. The industry earnestly awaits official statements or clarifications from the authorities regarding the future direction of video game regulations.

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