China Takes A Swipe at Gaming Industry With New Rules Limiting Play Time For Minors

China Takes A Swipe at Gaming Industry With New Rules Limiting Play Time For Minors

In a new episode of its tech crackdown, China’s National Press and Publication Administration (NPPA) has released a notice imposing new rules, limiting online gaming time for minors. Kids and teens under 18 years old will have three hours weekly to play online video games.

On September 1st, video game companies will have to restrict gaming time to three hours a week — from 8 PM to 9 PM on Friday, Saturday and Sunday.

According to the translated version of the notice, the new rules will apply to companies providing online game services to minors, limiting their ability to serve those users outside the approved hours. The companies are also restricted from providing services to users who do not log in with their real-name registration.

The new set of restrictions are geared toward tackling addiction to online games. China has had to deal with growing cases of game addiction, especially among youths. The National Press and Publication Administration said online gaming has an impact on both the physical and mental health of minors.

The restriction system was adopted by Tencent in 2018, to limit play time on Honor of Kings, a widely popular mobile game.

But as TechCrunch noted, back then, limits weren’t as strict, as children up to age 12 could play one hour per day, and up to two hours per day for children between 13 and 18. At the time, authorities were concerned about worsening myopia among minors.

There is concern that the new rules will exacerbate the predicament of Tencent and gaming companies in China, who are already under the weight of the government’s crackdown.

“There are over 110 million minors that play video games in China today, and we expect the new limits to lead to a decline in the number of players and a reduction in the amount of time and money spent in games by those under 18,” Niko Partners senior analyst Daniel Ahmad said.

As TechCrunch noted, online gaming is mentioned specifically, which could mean that solo games won’t be restricted going forward. Also it’s unclear whether console games and foreign games will go along with the new rules, including the implementation of the new real-name-based registration system.

Some young gamers will also be tempted to circumvent the restrictions by signing up on a foreign server.

These open the Chinese gaming industries to uncertainties, though there is hope that it would have less impact on game companies as adult players will still be able to play 24/7.

“However, we do not expect the decline in spend to have a significant material impact on the bottom line of game companies given limits on time and spending have already been in place for minors for the past two years. Therefore, we expect a softer impact on overall growth rates as spending among minors was already low,” Ahmad added.

Tencent had earlier said that the amount of revenue coming from young game players is insignificant, given the existing restriction that allows them only a limited time. The company said it received only 2.6% of its second quarter gross game receipts in China from players under the age of 16.

In response to the new rules, Tencent issued a statement expressing its strong support for the new rules, saying it “will make every effort to implement the relevant requirements of the Notice as soon as possible.”

However, the news has seen the shares of some game companies drop. US-listed NetEase, another popular Chinese game development company, and Tokyo-listed Nexon and Koei Tecmo, shares fell 3%.

The culminating consequences of China’s crackdown on its tech industry is painting a grim future for its companies. Investors’ confidence in China’s market is plummeting, especially for US-listed Chinese companies.

“Policy uncertainty remains in the forefront. There is some calmness in the Chinese markets now from the lack of negative news. However, confidence is extremely fragile now,” Dave Wang, portfolio manager at Nuvest Capital, told CNBC. “Thus, if the Chinese authorities continue to release bits and pieces of negative news and worse another unexpected policy, we could see a renewed sell off.”

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