China restricts spending on video game rewards. The market lost almost $80 billion

Chinese regulators have announced a series of new rules aimed at limiting the costs and rewards that encourage video game players. The world’s largest gaming market, which has only just begun to recover, has received a powerful blow, writes Reuters.

The shares of Tencent Holdings, one of the largest gaming companies in the world, immediately fell by 16%, while those of its closest competitor, NetEase, dropped by 25%. The Chinese video game market lost almost $80 billion dollars in market value almost instantly.

The new rules prohibit rewarding players if they log in every day, if they spend money on the game for the first time, or if they spend money on the game several times in a row. Such reward mechanisms work in almost all online and mobile games. Additionally, game developers should set limits on how much players can fund their digital wallets for in-game spending.

Over the years, China has imposed increasingly stringent requirements on video games. In 2021, China imposed strict time limits on gaming for players under the age of 18 and suspended approval of new video games for about eight months, citing concerns about gaming addiction. Although the crackdown formally ended in 2022 with the resumption of approval of new games, regulators continue to impose restrictions to curb in-game spending.

One could argue that at least someone is trying to curb the less-than-honest practices of making money in games, but… changing market rules at the behest of the Communist Party has never worked out well.

What does this mean for Western and Ukrainian gamers? Chinese gaming companies, such as Tencent Holdings, NetEase, and others, will be more willing to invest in more stable markets, i.e., to buy leading Western, including Ukrainian, studios.