Gaming stocks surge after Beijing resumes video game approvals after 9-month freeze

A group of teenagers play video games. Photo: US News

Chinese gaming companies’ nightmare is apparently coming to an end after Beijing said that it would resume approvals for new video games after a nine-month freeze.

“Approvals for the first batch of games have been completed. We will hurry up to issue licenses,” Feng Shixin, deputy head of the State Administration of Press and Publications (SAPP), told a gaming conference in the southern island province of Hainan last Friday.

“Due to the large volume of games for review, we will need to take more time. We hope everyone can be more patient,” Feng added.

Gaming developers in China are required to submit their products to the regulator for approval before they can be sold in the domestic market.

However, the process has been halted since late March amid concerns over childhood myopia and online addiction, which, parents and experts claimed, does great harms to the health and school lives of almost a whole generation of school children.

Chinese President Xi Jinping in August called for greater attention to teenagers’ eyesight, citing the World Health Organization data suggesting the country has the highest rate of childhood near-sightedness in the world.

The freeze on approvals has dealt a huge blow to the world’s largest gaming market.

In 2018, China’s gaming companies were expected to harvest revenues of some 214 billion yuan (US$31 billion), up only 5 percent from last year, according to data released by the Beijing-based research firm CNG last Friday.

This would be the first time that the market has slowed to a single-digit growth since 2009.

“A dozen friends of mine in the gaming industry have been under heavy financial pressure, and some have been on the brink of bankruptcy,” an executive at a middle-sized gaming company told China’s influential finance magazine Caixin.

“For many startups, freeze on licenses can be a disaster. Some might have invested heavily on a single game, but now they don’t even have a chance for a release,” he added.

Even Tencent, China’s flagship gaming company, reported declining profits in the second quarter, the first in over a decade. Its gaming revenue continued to fall 4 percent in the third quarter, Caixin reported.

“We launched about 50 new video games in 2017, but only had 26 between January and October this year,” said Ma Xiaoyi, a senior executive at the Shenzhen-based company.

Over the past nine months, the regulator has delayed approving or directly blocked some of Tencent’s video games, such as “Monster Hunter: World” for which big sales were expected.

In response to Beijing’s concerns over video gaming addiction, some companies have taken action to detect minors while they are online.

Tencent, for instance, has made age-verification mandatory to those who log into its popular Honor of Kings, which limits children’s playing time. The game is extremely popular with school children in China, but also a headache for parents as they often found their kids glued their eyes on the smart phone screen for the game.

Some developers have also ramped up efforts to release new video games overseas for survival.

Following Feng’s comments, shares in China’s leading gaming companies including Tencent, NetEase, and Perfect World surged.

Resuming video game approvals is definitely good news for China’s gaming industry, which is dominated by domestic gaming companies, and helps boost investors’ confidence.

With an estimated 620 million players, which almost doubles the US population, game developers can look forward to a lucrative market.

Some industry insiders, however, still remain cautious about Beijing’s latest move.

“While there is no clear legislation on gaming industry, it’s up to the regulator to decide what they pass and what they don’t,” said an executive at Tencent’s game division, asking not to be named. “ There is still a lot of uncertainty.”


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