China approves new online games as crackdown eases

Chinese regulators have approved new online games for the first time in nine months, in the first signs the government was easing its crackdown on the previously burgeoning sector.

China’s biggest tech companies, including gaming giant Tencent, have come under heavy regulatory scrutiny over the past two years as the Communist party sought to overhaul the private sector, a move which saw billions wiped off their collective market value.

China’s wealthiest entrepreneurs and leading companies have been targeted as part of a policy called “common prosperity,” which ostensibly aimed to widen opportunities and living conditions for the country’s middle classes. Apart from gaming, other targeted industries included fintech, education and entertainment.

Authorities paused approvals for new games in July last year over concerns the country’s children were addicted to online titles that undermined Communist party values.

A month later, Chinese children were banned from playing video games for more three hours a week, hitting providers such as NetEase and Tencent even further and slowing revenue growth. Also in August state media briefly lambasted gaming as a form of “spiritual opium”.

The restrictions limited the ambitions of foreign gaming companies, including Roblox, which sought to break into the Chinese market of 720mn gamers last year with its platform, which is popular with preteens.

China’s National Press and Publication Administration released a list of 45 games on Monday that it said were approved last Friday. No Tencent games were on the list but one called Jinji de Tuzi from Baidu, the Chinese search giant, was included.

The game approvals come as China’s security regulators issued a statement that they would “support the healthy development of the [financial] market” in a move designed to calm investors spooked by the impact of the country’s Omicron outbreak.

The report led to pre-market gains for US-listed Chinese gaming stocks on Monday. Bilibili’s Nasdaq-listed shares rose by over 8 per cent pre-market, while NetEase jumped by nearly 8 per cent.

The National Press and Publication Administration, in charge of licensing video games in China, last approved video games on July 22 last year. There was a similar nine-month pause in approvals in 2018.

While Tencent has said reliance on younger people was limited, its executives said revenue growth had been hit by the process of complying with China’s gaming edicts and restricting the access of minors to its titles.

The company had previously attempted to get ahead of the regulators by tightening restrictions on how long minors could play its online games and by deploying facial recognition technology to stop young people playing too long.

Tencent said this year it was expecting further regulation in the future but predicted the pace of new rules introduced over the past two years would start to slow down.