Tencent loses $46bn in m-cap amid China's online gaming curbs
China is cracking down on online gaming, implementing new measures to curb spending and content, which has led to a massive $46 billion loss in Tencent's value. These draft rules, released by Beijing's top gaming regulator, aim to put an end to practices that encourage players to spend more money and time on gaming platforms. As a result of these new rules, Tencent's stock has plummeted by more than 12%, marking its largest intraday fall since 2008.
Impact on gaming companies and market growth
Other gaming companies have also been affected, with NetEase Inc. dropping 28% and Nexon Co. falling 8%. Bilibili Inc., a social media service popular among gamers, declined by 6.1%. China's gaming market was predicted to grow nearly 14% to 302.9 billion yuan (Rs. 3.62 lakh crore) in 2023, according to data provider CNG.
Key restrictions in the new draft rules
The proposed regulations include banning rewards for frequent log-ins, forced player duels, and prohibiting content that violates state secrets. Zeng Xiaofeng, Vice President at Niko Partners, told Bloomberg, "This will deal a blow to the overwhelming majority of games in China, except those that sell copies." "Companies will need to overhaul their monetization models, including how they charge money from different tiers of players," Xiaofeng added.
Proposed cap on player spending and international compliance
The government plans to set a cap on the amount of money each player can spend within a game, as per the draft regulations. Additionally, game publishers operating abroad are expected to respect Chinese laws and culture and avoid endangering national security. Tencent has investments in studios such as Epic Games in the US and Supercell in Europe. The agency will accept feedback on the proposed rules for a month but has not specified when they will be enforced.
