Tencent and NetEase stock crashes, nearly $80 billion wiped out following China’s new regulation on online gaming

China's new video game regulations create investor panic as Tencent and Netease stocks plunge with $80 million in market value lost.

Tencent and NetEase stock crashes, nearly $80 billion wiped out following China’s new regulation on online gaming

Tencent and NetEase stock plunge (Image via: Open source)

Tencent and NetEase are industry giants in video gaming. However, the Chinese government constantly cracks down on video gaming, causing the two companies to suffer huge losses.

On December 21, Chinese regulators announced new rules for publishers that would curb spending and reward people for playing video games.

YouTube video

The new rules have created a sense of panic among investors as they heavily pull back from such companies. Nearly $80 billion in Marvel value has been wiped from Tencent and NetEase, and it shows no signs of slowing. 

Moreover, Tencent’s shares plunged nearly 16%, along with those of its rival NetEase, which lost 25% after the National Press and Publication Administration announced it. 

Vigo Zhang, Tencent Games’ vice president, announced the new rules. Zhang mentioned that Tencent will not need to fundamentally change its “reasonable business model or operations” for video games. Zhang added that the company had been strictly implementing regulatory requirements. 

The Tencent president also talked about how minors had spent a historically low amount of money and time on video games by Tencent ever since 2021, when the Chinese government started focusing on minor protection. No high-level executive from NetEase commented on the situation.

China introduces new gaming regulations that cause Tencent and NetEase to plunge

The Chinese government has tried to crack down heavily on video gaming over the last half-decade. This is quite ironic, considering they are one of the biggest markets and publishers of video games.

In 2019, the Chinese government set playtime limits for gamers under 18. Furthermore, in 2021, they suspended approvals of new video games for nearly eight months.

PUBG Daily Log-in Reward
Image via: Tencent

After this ban in 2021, 2022 was the most challenging year for gaming in China, as total revenue in the sector shrank for the first time in the country. The Chinese government has found a new way to crack down on this common hobby.

China regulators announced on December 21st a new bunch of rules curbing spending and rewards that incentivize people to play video games. Video games can no longer award daily log-in bonuses, a common practice of many online games such as PUBG. 

Additionally, video games cannot reward players for spending for the first time in a video game or for spending multiple times consecutively. There are limits to how much gamers can top up their in-game wallets.

Publishers can no longer offer probability-based lucky draw features such as loot boxes to minors or allow for the speculation and auction of in-game items.

In case you missed it: