Strict policies on video game monetization in China have led to a slow and somewhat diminishing landscape for the overall tech industry in the world's second-largest economy. Stemming largely from concerns surrounding Chinese gaming addiction, the country has taken major steps in curbing the industry to fit its newfound policymaking.
To monetize video games in China, the experiences must first go through an approval process from regulators, like the National Press and Publication Administration. On Monday, this very regulatory watchdog went ahead and approved a total of 45 games for monetization, those being from the likes of domestic publishers such as Kingsoft, XD Network, and more.
According to Niko Partners' senior analyst, Daniel Ahmad, the news comes not 263 days following the last freeze on games approvals in 2021, which mirrors similar actions made in 2018. The Chinese gaming approvals have now led US-listed shares of China-based gaming companies to leap dramatically, despite not seeing any tangible alterations themselves.
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NetEase is one of these very same stocks that took a 3% bump in early morning trading on Monday, yet none of the approvals made are of any NetEase-owned games. Similar occurrences were made via the likes of video game streaming services, such as Huya, DouYu, and Bilibili, the latter of which is seeing an over 6% jump in share prices as of writing.
Both Huya and DouYu were most recently in weighted discussions on a merger, which the Chinese government would block on the grounds of breaking antitrust laws. The $5.3 billion mergers, headed by Huya's largest shareholder Tencent, would have seen the latter gaining nearly an 80% stake in the video game live-streaming sector. Tencent also owns more than a third of DouYu, showcasing the breadth of reform needed in China's tech sector.
Additionally, according to Niko Partners, China has a total video gaming population of nearly 720 million, with 48% of said gamers being largely female. To amend drastic diminishes in overall value for domestic gaming giants, like Tencent and NetEase, new policymaking and faster regulations are necessary to push the industry into greater heights.
The world's second-largest video game publisher, Tencent cited increasing losses in its Q4 2021 report due largely to these newfound Chinese regulations. The company even had to cease its plans of building out a streaming platform, Penguin Esports, in light of various policies enacted by the Chinese government writ large on the domestic tech sector.
Game monetization was a huge push via the likes of the aforementioned Tencent and NetEase, but the Chinese government sought to hinder under-18s access to video games following woes of mass gaming addictions in the country. China implemented new playing limits while also stopping its monetization licenses entirely as a way to skirt said health concerns. With newfound approvals being set underway, the Chinese gaming industry will no sooner see a boost in the backing as policies begin to diminish.
