Since August 2021, facial recognition devices have been restricting minors in China to playing online games for no more than three hours per week. In addition to this hit on their revenue stream, gaming companies in China are facing all the policymaking hurdles encountered by Chinese tech companies in general, such as restrictions on personal data processing imposed by the new data protection law, and stricter application of antitrust policies leading to hefty fines for practices now deemed monopolistic.
China is putting the screws on the gaming industry due to concern for the development of its youth and fear of minors getting addicted to games. However, these regulations are also seemingly part of the new “common prosperity concept” of wealth distribution in China, which aims to narrow the vast income gap in the country. Introducing new regulations and tightening existing rules can be seen as China’s attempt to moderate huge earnings of its tech industry, estimated to be worth almost USD 600 billion in 2020. These regulatory crackdowns also prompted Chinese tech companies to make significant donations to remain on the government’s good side. Tencent Holdings Ltd. (Tencent), one of the largest Chinese gaming companies, made a USD 7.7 billion donation to pledge its allegiance to the common prosperity cause.
Nonetheless, due to investors’ fears surrounding the mentioned crackdown, Tencent and NetEase Inc., another large Chinese gaming company, jointly suffered a decrease in value of more than USD 60 billion in September 2021. Even important figures such as Masayoshi Son (the Japanese billionaire investor) are hitting pause on Chinese tech investments. These fears are not unfounded, as Chinese regulators’ tightening grip on tech companies could have grave consequences. Overly strict regulation would leave no room for growth and would result in a probably irreparable decline in value. In a worst-case scenario, the common prosperity concept could ultimately lead to the Chinese government’s control over tech companies’ corporate decision-making, and the complete exclusion of foreign investments and interests. It remains to be seen if there is room for gaming mega-corporations (and tech billionaires) in China’s new, common prosperity society. The outlook is, however, grim.
