China Quietly Removes Draft Video Game Rules From Website

China's gaming regulator's unexpected removal from its official website of proposed restrictions on the video game industry has sent ripples through the market, signaling potential shifts in the regulatory landscape for local gaming giants.

According to TechCrunch, weeks after the initial release of draft guidelines that wiped tens of billions of dollars off the market value of local titans, Beijing has removed the controversial draft rules from the official website. 

(Photo: ADEK BERRY/AFP via Getty Images)(FILES) South Korea (C) and Taiwan (R) teams prepare to compete in the Esports League of Legends final match during the Hangzhou 2022 Asian Games in Hangzhou in China's eastern Zhejiang province on September 29, 2023.

China Pulls Proposed Draft Gaming Rules From Website

Haitong Securities reported the unavailability of the link to the draft rules on Tuesday, fueling speculation about the motives behind Beijing's quiet reversal. 

Share prices of industry leaders Tencent and NetEase experienced a notable uptick following the news, prompting analysts to suggest that further changes in the proposed measures might be underway.

This surprising move follows the removal of the head of the publication bureau of the Communist Party's Propaganda Department, responsible for handling the release of draft rules. 

The sudden removal of the official, coupled with the withdrawal of the proposed curbs, underscores the complexities of China's regulatory environment and its impact on investors and major players in the gaming industry.

In the aftermath of the market turmoil, local media reported that authorities were open to revising some of the proposed rules. This softening stance could be a hint in response to the unexpected blowback and concerns raised by investors and gaming companies.

China's Proposed Curbs on the Video Game Industry

Last month, China's video game regulator proposed fresh measures to address concerns about excessive time and money spent on computer and smartphone games.

The guidelines outlined stringent restrictions, including a ban on incentives for daily log-ins or purchases, limitations on user recharges, and warnings for "irrational consumption behavior."

The proposed restrictions, if implemented, could significantly impact gaming giants like Tencent. One of the critical elements targeted by the rules is the common industry practice of providing rewards for daily log-ins, a strategy that ensures sustained player engagement and interest. 

The removal of such incentives could necessitate a reevaluation of game design and monetization strategies. China's approach to video game regulation evolved over the years, becoming increasingly stringent.

In 2021, strict playtime limits were imposed for individuals under 18, and new game approvals were suspended for eight months to address concerns about gaming addiction. 

The latest set of rules represented the most explicit measures yet, focusing specifically on in-game spending. The regulatory whiplash, marked by the withdrawal of proposed restrictions, suggested a dynamic and evolving landscape for China's gaming industry. 

Investors were likely closely monitoring further developments, considering the profound impact that regulatory decisions could have on market valuations and directions of major gaming companies.