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Gaming stocks hit hard after China limits gaming time again

Gaming stocks were hit hard on Monday as China unveiled the strictest-ever rules limiting kids’ gaming time.

FILE PHOTO: Visitors are seen at the Tencent Games booth during the China Digital Entertainment Expo and Conference, also known as ChinaJoy, in Shanghai, China. REUTERS/Aly Song/File Photo

China’s Gaming regulation

On Monday, China’s National Press and Publication Administration announced additional severe regulations to combat gaming addiction. The new regulations prohibit anybody under the age of 18 from playing video games during the school week and limit them to one hour per day on Fridays, weekends, and holidays.

The new restrictions, which went into effect on Monday, are part of a dramatic shift by Beijing to tighten control over society and key areas of the economy, like technology, education, and real estate, following years of rapid development.

The limitations, which apply to all devices, including phones, are a major setback for a worldwide gaming business that serves tens of millions of young people in the world’s most profitable market.

The National Press and Publication Administration’s (NPPA) regulations come as part of Beijing’s larger crackdown on China’s internet behemoths, such as Alibaba Group and Tencent Holdings. The drive to halt the “savage expansion” of some firms, as characterized by state media, has knocked tens of billions of dollars off the value of shares sold at home and abroad.

“Teenagers represent the future of our nation,” an anonymous NPPA spokesman was reported as saying by Xinhua. “Protecting minors’ physical and mental health is linked to the people’s essential interests and the development of the younger generation in the period of national rejuvenation.”

Gaming firms will be prohibited from offering services to minors in any manner outside of the specified hours and must guarantee that real-name verification procedures are in place, according to the authority overseeing the country’s video game sector.

Under previous laws, China limited the amount of time under the age of 18 may spend playing video games to 1.5 hours on any given day and three hours on holidays. The new regulations quickly became one of the most talked-about issues on Weibo, China’s equivalent of Twitter. Some people praised the changes, while others expressed astonishment at how stringent the limits were.

Gaming stocks suffer

According to analytics firm Newzoo, the Chinese games business will earn an estimated $45.6 billion in sales in 2021, surpassing the United States. The repercussions of the crackdown were felt all across the world.

Prosus, an Amsterdam-listed digital investment firm with a 29 percent interest in Chinese social media and video game business Tencent, was down 1.45%, while Ubisoft and Embracer Group, both European online video game companies, were down over 2%.

In pre-market trading in the United States, shares of Chinese gaming companies fell, with NetEase plunging nearly 6% and mobile game producer Bilibili losing 3%. According to official media, 62.5 percent of Chinese minors play online games often, and 13.2 percent of underage mobile game players play for more than two hours each day on working days.

In recent weeks, gaming businesses have been on edge as state media has criticized gaming addiction among young people, implying a regulatory crackdown. This month, a state-run news site referred to online games as “spiritual opium” and referenced Tencent’s “Honor of Kings” in an article calling for tougher regulations, sending shares of the world’s largest gaming company by revenue down.

Tencent later announced additional steps, beginning with Honor of Kings, to decrease the amount of time and money children spend playing games. Its president also stated that the company was working with regulators to see whether there was a method to restrict the overall amount of time kids spend on gaming across all titles.

According to Xinhua, the NPPA regulator will boost the frequency and intensity of inspections of online gaming businesses to guarantee that time restrictions and anti-addiction mechanisms are in place.

It went on to say that parents and teachers were crucial in preventing gaming addiction.

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