February 21, 2024 11:17:54 booked.net

Proposed Regulations in China Trigger Sharp Drop in Tencent and NetEase Shares

On Friday, China unveiled draft guidelines aiming to restrain excessive spending in online gaming, marking the Communist Party’s latest effort to manage the virtual economy. The announcement led to a significant decline in the stock prices of major Chinese gaming companies, Tencent and NetEase, on the Hong Kong stock exchange.

The National Press and Publication Administration, China’s gaming regulator, outlined guidelines prohibiting online games from offering incentives for daily log-ins or purchases. Additional restrictions include capping the amount users can recharge and issuing warnings for “irrational consumption behavior.”

Tencent, the largest gaming company in China, saw its shares plummet by approximately 16%, eventually recovering some ground to close 12% lower. Meanwhile, NetEase’s stock price experienced a substantial loss of about 25%.

This move is part of Beijing’s ongoing efforts to regulate the online gaming sector. In 2021, authorities imposed strict limits on the amount of time children could spend playing games restricting it to just three hours per week. State media even referred to online games as “spiritual opium,” drawing parallels to historical eras when addiction to the drug was prevalent in China.

Furthermore, approvals for new video games were suspended for about eight months, resuming only in April 2022 as part of a broader easing of regulatory measures on the technology industry.