Lhe regulatory world is not a priori the most exciting, but, in China, it can cause drama. At the end of December, the National Administration of Press and Publications performed one in three acts. The announcement, first: on December 22, 2023, this institution presented a text aimed at regulating video games. Among the key measures, limiting online player spending and banning rewarding the number of daily connections, a very addictive tool for young players.
Problem is, these new rules, which make sense from the point of view of the regulator responsible for limiting young people’s addiction to video games, risk costing the giants of the sector dearly. Hence, secondly, the panic: on the day of the announcement, Tencent, the world number one in video games, fell by more than 10% on the stock market, and NetEase, the Chinese number two, fell by more than 20%. .
Third stage, backpedaling: three days after the announcement, the regulator reminds us that it is only a bill, that it will “study carefully” public comments, and at the same time approves the launch of 105 games at once, just to show its support for the industry.
But the damage is done. The video game giants have experienced a weak recovery on the stock market, but are far from their previous level. Because this new measure has raised fears of the return of a painful tech regulation campaign which has caused the largest Chinese companies to lose tens of billions of yuan in market capitalization: Alibaba, Tencent, Meituan, JD.com… Launched in 2020 when the economy was still doing well, it had mixed rather justified measures (fight against monopolistic practices) with a strengthening of state control, such as the de facto ban on entry into the stock market in the United States. At the heart of this campaign, the outright ban on the private distance education industry was particularly shocking.
A scary method
At the start of 2023, when the economy was in agony after three years of zero Covid policy, the authorities had signaled the end of this campaign, the ” correction “ having been “generally accomplished”, according to an official. The time was more for support for the private sector than for all-out regulation. But this new priority does not seem to have been understood by everyone!
Because trust cannot be decreed. More than the very content of the latest measures against video games, which are not absurd, it is the method which frightens the private sector: lack of transparency and predictability, absence of recourse, arbitrariness is at stake. both in the creation of rules and in their application. For investors, this new episode is a bitter reminder of the political risk weighing on the economy in China. At the start of 2024, the Shanghai Stock Exchange fell below the 2,900 point mark on Monday January 8, its level… ten years ago.
You have 30% of this article left to read. The rest is reserved for subscribers.