China Approves 105 New Online Games After Draft Curbs Trigger $80 Billion Market Collapse

In a move to bolster the online gaming industry after a tumultuous week over proposed restrictions, China's National Press and Publication Administration has given the green light to 105 new online games.

According to the Associated Press, the announcement, made via the administration's WeChat social media account on Monday, highlighted the approvals as "positive signals that support the prosperity and healthy development of the online game industry."

China's Online Game Market in Turmoil

Among the online games approved were Tencent's "Counter War: Future" and NetEase's "Firefly Assault." The decision comes in the wake of last week's market turmoil, wherein draft guidelines proposing curbs on online gaming led to substantial losses for major game developers such as Tencent and NetEase.

Share prices had plummeted, resulting in losses of tens of billions of dollars and negatively impacting Chinese stock benchmarks. Thus, the latest move seems to be a damage control.

The guidelines issued by the administration outlined restrictions on online games, including a ban on offering incentives for daily log-ins or purchases. Additional measures included user limits' recharges and warnings for "irrational consumption behavior."

These proposed restrictions will likely impact gaming giants like Tencent, which could be more pronounced following a sharp stock decline. It must be noted that most games have daily rewards that encourage players to log in daily. This incentive ensures that games have longevity and keep piquing players' interests.

However, these incentives may be backburned if China decides to roll out its proposed restrictions. Restricting a fundamental feature in such games could ultimately change the dynamics in the video game landscape.

Sharp Decline in Stock Prices of Major Gaming Companies

When initially revealed, these guidelines triggered a sharp decline in the stock prices of major gaming companies. China's new restrictions for online games reportedly triggered an $80 billion market selloff.

Netease's Nasdaq-traded shares experienced a 16.1% drop, while its Hong Kong-traded shares plummeted by 25%. Tencent's shares closed 12% lower, and Huya Inc., a smaller online games maker, lost 10.7% on the New York Stock Exchange. According to AP, these companies witnessed significant market value erosion.

Despite the Christmas holiday closing the Hong Kong market on Monday, share prices in Shanghai remained relatively flat. The National Press and Publication Administration highlighted that in 2023, 1,075 game version numbers were issued, with 977 being locally produced and 98 imported.

It also referenced a "2023 China Game Industry Report," saying that sales revenue for the domestic online games market surpassed ¥300 billion ($42 billion) in 2023, with a player base of 668 million individuals.

The administration's statement emphasized the importance of member units seizing this opportunity to launch high-quality products, fostering the development of the online game industry, and contributing to cultural prosperity and growth.