Investors panic due to China’s new rules to reduce spending on video games, $80 billion lost

 – Gudstory

Investors panic due to China’s new rules to reduce spending on video games, $80 billion lost – Gudstory

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China on Friday introduced strict rules aimed at curbing spending and rewards that promote video games. The decision is being called a major blow to the world’s largest gaming market, which was still recovering from the impact of Covid-19. As soon as word spread, investors became nervous and according to one reuters Nearly $80 billion was wiped off the market value of China’s two largest gaming companies, according to the report.

The government of China has decided to ban online games from awarding players rewards for regular daily logins, initial financial transactions within the game, and frequent instances of spending. These special reward mechanisms, which have become widely employed in the field of online gaming, are now subject to restrictions aimed at promoting a more balanced and equitable gaming environment.

“It’s not necessarily regulation – it’s much more of a policy risk,” said Steven Leung, executive director of institutional sales at broker UOB KHian in Hong Kong. “People thought that this kind of risk-taking should have gone away and they started focusing on fundamentals again. That hurts confidence a lot.”

Tencent shares fell 16%

The decision to ban video games did not go down well with investors as shares of gaming companies saw a sharp decline. Shares of Tencent Holdings, the world’s largest gaming company, fell 16% and so was NetEase as its shares traded 25% down on Friday.

However, Tencent management has maintained an optimistic stance regarding the new regulations and its vice president Viggo Zhang has said that the company “will not need to fundamentally change its proper business model or operations for games.”

fight gaming addiction

Over the past few years, Beijing has taken an increasingly tough stance toward video games. In 2021, China implemented strict time restrictions for individuals under the age of 18, and suspended approvals for new video games for approximately eight months, attributing these measures to concerns related to gaming addiction. .

While the formal crackdown ended last year with the resumption of new game approvals, regulatory authorities have continued to impose limits to reduce excessive “in-game” spending.

(With inputs from Reuters)

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Published: 23 Dec 2023, 12:42 am IST

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