Tencent Holdings Ltd. and NetEase Inc. had lost more than $60 billion in value as investors shiver on the possibility that Chinese regulators would soon slap the gaming industry with stricter policies.
In a report by state-run Xinhua News Agency, it said that Chinese regulators have summoned industry executives and ordered them to prevent minors from becoming addicted to their games.
The South China Morning Post said that the regulators have also notified the country's gaming companies that it will now slow down the approvals of new online games. This was a correction from the news outlet, which originally said that the government will outright freeze game approvals.
The government's recent focus on the country's gaming industry has significantly affected Tencent's American Depositary Shares, but it eventually recovered some of its losses and settled at 2.8% after dropping as much as 5.2%. NetEase's ADR, on the other hand, had closed 2%, after shedding nearly 7% of its value.
For months, the gaming sector, especially the investors behind it, are having a tough time because of the government's growing pressure on their operations. Authorities are also tightening their policies on the country's e-commerce and ride-hailing industry.
But the gaming industry has been the focus of the headlines recently because of the involvement of minors, whom the government wants to "protect" from the addictive effects of online gaming.
Last week, the government enforced a limitation on the amount of time that children must spend on online video games, limiting it to only up to 3 hours per week.
Back in 2018, the government imposed a 10-month freeze on game monetization licenses and rolled out policies to fight addiction -- and myopia -- among children.
This policy had a huge impact on Tencent that it has lost $200 billion in value, which became one of the worst, if not the worst impact it had to bear because of the hardline policy.
The Chinese government described online games as "spiritual opium" because of their addicting effects that are also affecting the physical and mental welfare of the young citizens of the country.