China’s recent restrictions on video games had their merits. Why did the authorities pull the plug and what happens next?

The removal did not go unnoticed by local news platforms and Chinese internet users.

“The elders’ way of controlling the stock market,” said one comment after a gaming blog reported on the repeal of the proposed rules.

“Let’s not celebrate too soon, who knows the day will come when another strange regulation will be proposed,” wrote another commentator in Beijing.

One analyst said China’s transition to pro-growth initiatives likely influenced the withdrawal of the draft rules.

“The government’s recent emphasis on maintaining positive market sentiment suggests that such restrictive measures have been counterproductive to its broader economic goals,” Ivan Su, a senior equity analyst at research firm Morningstar, told CNA.

China is facing economic headwinds including a housing crisis, record high youth unemployment and persistent deflation.

Against this backdrop, a hit to China’s lucrative gambling market – the largest in the world – could prove difficult to swallow. According to industry association CGIGC, domestic sales exceeded 300 billion yuan ($41.6 billion) for the first time last year.

Meanwhile, the number of gamers in China rose 0.61 percent to a record 668 million, almost twice the total U.S. population.

Asked why authorities implemented a crackdown on private tuition fees in 2021 – which also decimated the market value of listed tuition fee companies – while simultaneously tapping the brakes due to stricter gambling regulations, Mr Su pointed to the difference in scope.

He said the draft gambling rules were aimed at people of all ages. Meanwhile, the ban on tutoring was primarily aimed at reducing the academic workload of students under the age of 16.

“These broader impacts require more consideration and could lead to more complex impacts on different populations, requiring a more cautious approach,” he added.

Curbing spending on video games

China isn’t the first country to try to curb video game spending.

Various countries have taken measures against loot boxes or are taking action against them. These are virtual goodie bags that players can pay for to receive random rewards. The monetization technique has been compared to a form of gambling.

In Europe, Belgium imposed a total ban on loot boxes in 2018, a world first. The Netherlands is considering a similar move, while Spain is pushing for a ban on loot boxes for minors.

Source link