(Bloomberg) — There are growing signs that China is trying to contain the fallout from tough new gaming regulations that sent Tencent Holdings Inc. and its peers plummeting by $80 billion.
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Feng Shixin has lost his job as head of publishing at the country’s gaming regulator’s propaganda department, Reuters reported, citing people briefed on the matter. His resignation was linked to the surprise release of the draft rules days before Christmas, which triggered a sell-off and provoked angry comments from industry insiders.
The gaming watchdog, the National Press and Publication Authority, has since softened its stance, approving 105 games and pledging to review more controversial mandates, including non-quantitative caps on in-game spending. But some investors are still traumatized by the Big Tech crackdown in 2021, when sectors from e-commerce to entertainment were derailed by unpredictable regulations from myriad Chinese government agencies.
Tencent and smaller rival NetEase rose about 1% in Hong Kong on Wednesday, spurring a recovery after officials began to show they would take industry opinions into account. However, WeChat operators remain down about 4% since the proposed rules were announced on December 22nd.
Stephen Leong, executive director of UOB Keihian, said the official’s dismissal “comes after the post-COVID-19 economic recovery turned out to be much weaker than expected, leading to huge capital outflows from the stock market. “This shows that the Chinese government is more concerned about business confidence.” “While the likelihood of further panic selling for the sector will be reduced, changes in such a short period of time mean policy remains uncertain and may not be able to attract fresh liquidity buying. do not have.”
Read more: Tencent leads $80 billion loss as fears of China’s crackdown reignite
Bloomberg intelligence statement
Confidence in Tencent and NetEase’s prospects further improves after the South China Morning Post, citing anonymous sources, reported that key officials involved in overseeing China’s video game industry have resigned. there is a possibility. Sentiment was hit by the Dec. 22 stock price “flash crash,” but a more conciliatory tone in recent days from the China National Press and Publication Administration suggests that Tencent’s game could be worse in the absence of increased regulatory oversight. This confirms our view that the fundamental outlook for the business remains largely unchanged. new.
– Robert Lee, Analyst
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A call to the State Council Press Office, which handles inquiries from Chinese government media, went unanswered.
According to state media reports, Feng is representing the agency at an event designed to discuss regulatory initiatives, including areas such as licensing and real-name verification.
His dismissal, also reported by the South China Morning Post, may not have been enough to reverse market sentiment, which had been jittery over regulators’ intentions for the tech industry and an uncertain economy. do not have.
The sweeping gaming regulations that caught industry players and investors by surprise in the final trading day before Christmas reminded many of the brutal tech industry crackdown in 2021. That year, the Chinese government suddenly imposed restrictions and tightened regulations on many high-tech sectors. Jack Ma destroyed the online education industry by declaring the profits illegal while supporting Ant Group and Alibaba Group Holding.
Timing aside, investors and industry executives have criticized caps on the amount of money each player can spend in-game, bans on rewards for frequent logins and forced duels between players, and ambiguity in the draft rules. I didn’t really react. Prohibition of content that violates national security.
The vast regulations were introduced at the end of the year, when the Chinese government had signaled its intention to ease them. Officials have been promoting esports for the past few months as a driver for the post-COVID-19 economy. Xi Jinping himself attended the opening ceremony of the 19th Asian Games in Hangzhou, where for the first time professional games were included in the medals.
In December 2022, Tencent greenlit a series of major releases including Valorant and Pokémon Unite. It was a milestone that strengthened hopes that China would ease its two-year crackdown.
Market expert Redmond Wong said, “If this story is correct, it would send a signal that what happened is not a change in policy direction toward further tightening of the mobile gaming industry and online gaming industry, and it would be a sign of policy stability. “It may give investors some comfort in terms of certainty.” Strategist at Saxo Capital Markets in Hong Kong. “But overall, investors remain skeptical. This news, while positive, is not big enough to move the picture.”
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