Video game regulations China news: China's regulatory authority removes draft video game rules from its website, leading to a jumps in shares.
Video game regulations China news: China's gaming regulator has removed proposed rules from its website that were introduced last month to limit spending and incentives promoting video game playing, as observed by Reuters on Tuesday. The link to the draft rules on the National Press and Publication Administration's (NPPA) website was not accessible as of Tuesday morning, despite being functional on Monday. This development has led to a positive impact on gaming company shares.
The consultation period for the rules, initially causing market turbulence upon their announcement, concluded on Monday. Analysts find the removal of the rules from the website unusual, and some speculate that a revision may be underway. The National Press and Publication Administration (NPPA) has not yet provided a comment on the reason for the removal.
Analyst Xiaoyue Hu from Haitong Securities mentioned in a note to clients, reviewed by Reuters, that the removal of the announcement could indicate the possibility of "further changes in the new measures."
Xiaoyue Hu noted that in the past, regulatory measures seeking opinions typically remained on government websites even after the consultation period concluded.
In response to the removal of the proposed rules, shares of Tencent Holdings (0700.HK), the world's largest gaming company, and its closest rival, NetEase (9999.HK), experienced morning trading increases of as much as 6% and 7%, respectively. At noon, both companies' shares were still up more than 4%, outperforming Hong Kong's Hang Seng Index (.HSI), which saw a 2.4% increase.
The draft rules, suggesting spending limits for online games, initially caused panic among investors, resulting in a staggering loss of nearly $80 billion in market value from China's two largest gaming companies when they were first announced.
Analysts expressed concerns at the time, indicating that the plans raised the risk of potential regulatory changes, undermining confidence during a period when the government aimed to boost private-sector investment for economic stimulation.
However, five days later, the National Press and Publication Administration (NPPA) took a more conciliatory approach, stating its commitment to enhancing the rules by carefully studying public opinions. Earlier this month, Reuters reported the removal of a gaming regulatory official in connection to the rules.
Among the proposed rules, articles 17 and 18 were particularly contentious. The NPPA had acknowledged concerns about these articles in December, and analysts speculated that they might be removed or altered.
Article 17 aimed to prohibit video games from compelling players into combat, causing confusion as combat is a fundamental aspect of most contemporary multiplayer games. Article 18 required games to establish a spending limit for players and prohibited features that encouraged in-game spending.
Analyst Ivan Su from Morningstar suggested that the government might likely remove Article 17 and 18 from the final rule. Charlie Chai, an analyst at 86Research in Shanghai, noted that regulators have been trying to manage the fallout from the proposed rules. He mentioned that government officials seemed surprised by the overwhelmingly negative reaction and have since moderated their stance, labeling the proposal as 'negotiable.'
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