Online Gaming in China: New Rules for Approvals, Regulators to Vet Content

Posted by Written by Melissa Cyrill Reading Time: 2 minutes

Online gaming in China suffered a major setback in March last year when the government halted licensing new games. China Briefing briefly explains changes to the regulatory process for the digital gaming industry.

China’s press and publications regulator, the State Administration of Press, Publication, Radio, Film and Television, issued new rules for the online gaming industry on April 19.

Gaming firms are hopeful this could mean an end to the licensing freeze on monetizing online games that was introduced in March 2018.

The Publicity Department of the CPC Central Committee, which regulates the licenses for video games, ended the approvals ban in December before reinstating it in February this year when local authorities were asked to stop submitting applications.

The regulator said that it was “making adjustments”.

China accepting submissions for new online games from April 22

New submissions are being accepted from April 22 and will be subject to the new rules.

Earlier this month, regulators spoke with industry insiders and confirmed that the government had been going through the backlog of applications.

However, the time taken to hand out formal approvals will be key to the industry’s growth prospects.

Since the licensing freeze started, shares of leading gaming companies have suffered, including China’s Tencent and Perfect World, South Korean companies Nexon and Netmarble, and Japanese companies like Capcom and Square Enix. They all saw a bounce back after the temporary end to the ban in December.

Online gaming in China to be affected by vetting of content

Upon restarting the approvals process, the government clarified that it will actively vet the content of online games and control the number of games available in the market.

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In December last year, Feng Shixin, Vice Director of the Publicity Department of the CPC Central Committee’s copyright bureau, was quoted saying that problems in the domestic online gaming industry included lack of originality, culture, social responsibility, and a misdirection of values.

Digital gaming publishers have therefore been advised to create content that reflects China’s “core social values”, such as through games that promote traditional culture. Soon after it lifted the ban in December, two Tencent games – Folding Fan and Wooden Connection – received quick approvals as they were categorized as “functional games of an educational nature”.

Gaming market research consultancy Niko Partners expects that more transparency in the applications process is forthcoming and predicts a positive outlook for the industry in 2019.

Whether foreign game makers accept the new restrictions and unpredictability on the part of regulators as another threshold to entering the Chinese market remains to be seen. Already, foreign companies are required to license their games to a Chinese domestic company for distribution in the Chinese market.

China was the world’s largest gaming market in 2018 with an estimated 620 million gamers, generating about US$37.9 billion in revenue – out of which 60 percent came from mobile games.

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China Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers may write to china@dezshira.com for more support on doing business in China.