Tencent, NetEase plunge after China unveils proposal for tougher game regulations

National Business Wire (Dec 22) -- Tencent Holdings Ltd. (0700.HK) and NetEase Inc. (9999.HK), two major Chinese game publishers, tumbled Friday after China unveiled a proposal for stricter game regulations.

By Friday afternoon, Tencent had fallen more than 12% in Hong Kong, while NetEase was down more than 20%.

China's National Press and Publication Administration (NPPA) on Friday released a draft for comments on online game management measures.

The draft states that game operators shall not set up inducement rewards for daily logins, first-time top-ups, consecutive top-ups and other items in online games.

It also stipulates that online game publishers and operators shall not offer or condone the practice of trading virtual props at high prices in the form of speculation or auctions.

The new rules require game operators to set top-up limits for users in all online games and publicize them in their service guidelines.

Meanwhile, the NPPA asked game operators in the draft to step up scrutiny of online game live streaming, and prohibit high-value bounties and underage bounties.

And the proposal also emphasized that when providing random selection services, online game publisher and operator should make reasonable settings for the number of times and probability of selection, and should not induce online game users to overspend.

In August 2021, China began to implement on strict regulations to prevent minors from becoming addicted to online games, reiterating the requirement of real-name authentication for video games and setting stricter time limits for underage players.

Chinese regulators are now making more demands for game companies such as Tencent and NetEase to take more actions in terms of spending limits, transaction regulations, and anti-addiction systems.

The new regulations will "not only affect the revenue of game companies, but may also have an impact on the 'daily active users' of games," a person working in the gaming industry told Chinese media on Friday.

However, other industry insiders believe that the new rules will encourage Chinese game companies to look for opportunities overseas.

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