Chinese Video Game Stocks Sink on Government Efforts to Curb Online Gaming

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Key Takeaways

  • The Chinese government proposed new rules that would cap how much players can spend on video games and ban designers from rewarding daily logins.
  • Shares of Chinese gaming companies plummeted in response to the proposal.
  • China is one of the largest video game markets globally, with sales topping $42.6 billion this year.

Chinese gaming stocks tumbled Friday morning after regulators proposed new rules designed to curb the amount of time and money spent on video games. 

The rules, proposed by China’s National Press and Publication Administration, include an unspecified cap on how much players can spend within a game and banning developers from rewarding players for daily logins. The rules build on China’s already strict gaming regulations, which limit minors to playing video games between the hours of 8 p.m. and 9 p.m. on Friday, Saturday, Sunday, and statutory holidays.

Friday’s announcement came as a surprise to China’s gaming industry, which serves one of the world’s largest video markets. Chinese video game sales topped 300 billion yuan ($42.6 billion) in 2023.

Shares of Chinese gaming giants plummeted on the news. Tencent Holdings (TCEHY) stock trading over the counter fell more than 11%, while American depositary receipts of NetEase (NTES) slumped 17%.

E-commerce companies Meituan (MPNGF) and Alibaba (BABA) fell 5% and 1%, respectively, amid concerns that Friday’s rules could signal the resumption of a government crackdown on big tech that started in 2020 and had seemed to wane in the last year.

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