In a bid to curb online gaming and address concerns over youth video game addiction, China has announced a new set of regulations, triggering panic among investors and significant losses in the tech sector. The drafted restrictions target in-game purchases, obsessive gaming behaviour, and the promotion of specific features meant to extend gameplay time.
Reiterating a prior prohibition, the regulations uphold restrictions on "forbidden online game content" that poses a threat to national unity, security, reputation, and interests.
The draft introduces limitations on recharging in-game wallets to control excessive spending, while features aimed at prolonging gameplay time, such as rewards for daily log-ins, will be eliminated. Users will now also receive pop-up warnings highlighting "irrational" playing behavior.
This action is an extension of Beijing's measures against the gaming sector initiated in 2021 as part of a broader crackdown on Big Tech. The 2021 regulations included stringent limits on the amount of time children could spend playing online games.
China holds the title of the world's largest gaming market, with Tencent commanding a dominant position in global revenue. The regulations had an immediate and severe impact on Tencent, erasing around $54 billion from the company's market value. Competing firms like NetEase and XD also faced significant losses, with NetEase dropping nearly 25.0 percent at close, and XD shedding 19.0 percent.
The repercussions extended beyond gaming companies, affecting Hong Kong's Hang Seng Index, which plummeted more than four percent at one point before closing 1.7 percent lower. Other tech firms, including Meituan and Alibaba, also witnessed substantial declines, with Meituan dropping nearly four percent and Alibaba down about two percent.
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