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China is showing signs of easing its crackdown on the gaming sector

by SuperiorInvest

Chinese regulators have stepped up scrutiny of the domestic gaming sector over the past year and a half. But new doses of game approvals and positive steps to improve gaming addiction among children under 18 could be positive signs that the crackdown is easing.

Xing Yun | Costfoto | Barcroft Media | Getty Images

Beijing is showing signs that its crackdown on its domestic video game sector could be easing, which could be bullish for Chinese tech giants including Tencent and NetEase.

On Tuesday, research firm CNG, along with the China Game Industry Group Committee, which is affiliated with the game publishing regulator, released a report praising progress in reducing gaming addiction among under-18s.

Regulators have been concerned about gambling addiction among minors for some time. Last year, the National Press and Publication Administration of China she brought the rules which restricted children under the age of 18 from playing online games for more than 3 hours per week.

The CNG report carries weight as it was published in conjunction with a key gaming industry body with links to the regulator. The report states that more than 70% of minors play games for less than 3 hours per week, and the problem of minors’ gaming addiction has “reached a step toward resolution,” according to CNBC’s translation.

The positive news could signal a more optimistic outlook for China’s gaming sector.

“China’s tough regulatory approach over the past year has been the result of a lack of enforcement and compliance in key areas,” Daniel Ahmad, senior analyst at Niko Partners, told CNBC. “With gaming companies now fully compliant, we see a more positive outlook starting to develop.”

The CNG report also singles out major Chinese gaming companies including Tencent and NetEase for their positive steps to promote the protection of minors.

For example, both Tencent and NetEase use facial recognition find out if the person playing the game is an adult.

Another positive sign came last week when regulators approved a batch of 70 new games for release. In China, video games need approval to be published and monetized. Among the approvals was Tencent’s Metal Slug: Awakening, which Reuters reports represents the company’s first commercial license in a year and a half.

Last year, China froze approval of the Games only in the summer began playing greenlit in April of this year. But titles from Tencent, China’s largest gaming company, were missing from the lists until now.

Tencent’s management told analysts in a third-quarter earnings report last week that the company expects game licenses to be approved relatively quickly in the future, adding to further signs of regulatory oversight easing the sector.

Martin Lau, president of Tencent, said the company sees “positive signals across the path of macro and regulatory normalization.”

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