In a significant blow to the gaming sector, China's National Press and Publication Administration has called for public feedback on the draft of the "Network Game Management Measures" on December 22. The proposed regulations cover various aspects of the gaming industry, including game modes, charging models, licensing, content, and anti-addiction measures.
Following the announcement, the stock market reacted sharply in the afternoon session of December 22, with several listed companies hitting the lower circuit limit. Gaming giants Tencent (00700.HK) and NetEase (0999.HK) saw their shares plummet by 12.35% and 24.60%, respectively, erasing over 450 billion yuan (approx. $63 billion) in market value in a single day.
Despite the steep decline in share prices, Tencent's Vice President of Gaming, Zhang Wei, responded optimistically, stating that the draft regulations do not fundamentally alter the commercial model or operational rhythm of games. He expressed confidence that the solicitation of opinions from the industry and society by regulatory authorities would foster a more orderly and healthy development of the gaming industry.
In the A-share market, companies like Glacial Network (300533.SZ), ZQGame (300315.SZ), Baotong Technology (300031.SZ), and Sino-i Technology (300002.SZ) experienced significant drops, with some seeing hundreds of thousands of shares sealed at the limit-down price. Notably, institutions quickly exited these plummeting stocks, with transaction data revealing substantial sell-offs.
According to a report published by People's Daily on December 15, China's gaming industry achieved a record high in 2023, with actual sales revenue reaching 302.964 billion yuan, marking a 13.95% increase from the previous year and surpassing the 300 billion yuan milestone for the first time. The user base also grew to 668 million, a 0.61% increase, setting a new record. The mobile gaming market, in particular, saw sales revenue of 226.86 billion yuan, up by 17.51% year-on-year.
The proposed regulations and the subsequent market reaction underscore the Chinese government's continued focus on tightening control over the gaming industry, emphasizing the need for responsible gaming practices and the protection of minors. As the industry and investors digest the implications of these potential changes, the future landscape of gaming in China remains under keen observation.
