Proposed regulations on in-game expenditures deal major blow to China's tech behemoths
Shares of Chinese tech giants plummet as Beijing introduces strict regulations on in-game spending, causing a major blow to the gaming industry and triggering a wider crackdown
On Friday, several Chinese tech giants saw a sharp drop in their shares in Hong Kong, resulting in the loss of billions in their combined value. This was in response to Beijing introducing new regulations aimed at limiting online spending in the gaming industry, as part of its broader crackdown. Tencent, a major player in the gaming sector, experienced a significant 12.4% decline in its stock value, marking its worst performance since October 2008, during the height of the global financial crisis.
The decline in value caused Tencent to lose 367 billion Hong Kong dollars ($47 billion) based on CNN's calculation using stock market statistics.
NetEase, a major player in the gaming industry, dropped by 25% in Hong Kong afternoon trade, marking its largest single-day loss since its listing in June 2020.
The plunge caused a loss of 128 billion Hong Kong dollars ($16.4 billion) in value.
Bilibili, a major video-sharing platform in China, experienced a 9.7% drop. Kuaishou, the operator of China's second-largest short-video app, saw a 7.2% decrease. Both companies are involved in the online gaming industry.
NetEase, another gaming giant, dived 20% in Hong Kong afternoon trade.
The National Press and Publication Administration released draft rules on Friday, requiring online games to enforce spending limits and prohibiting in-game measures that may encourage high spending, such as daily login rewards. The proposed draft also bans in-game measures that could lead to the trading of virtual goods at high prices, such as auctions, and prohibits large tips to players who livestream their games.
Players must register with their real names, and game publishers are required to store data locally, as stated in the new rule. The popularity and profitability of in-game purchases have risen significantly in the gaming industry, especially in the case of free mobile games.
China is ramping up its efforts to regulate its online gaming sector, aiming to address the perceived increase in gaming addiction among the youth. In August 2021, the country implemented restrictions that prohibit gamers under the age of 18 from playing during weekdays and limit their playtime to three hours on most weekends.
Beijing's extensive crackdown on what it considers to be overly powerful companies, particularly in the Big Tech sector, has resulted in the loss of over $1 trillion in market value from Chinese companies worldwide and has caused concerns throughout the broader economy. However, with China's economic prospects declining, there are indications that Beijing may be relaxing its regulatory measures, often emphasizing the role of tech companies in the economy.
Before Fridays sell off, Tencent had rebounded 64% from its historic low on October 28, 2022.
