China’s regulators plan to limit the number of new online games and the total number of titles, as Beijing tries to mitigate the impact of gaming addiction among the nation’s children.
The new measures come on top of a freeze in game approvals nationwide and further muddies the waters for the industry, which labors under one of the world’s most opaque regulatory regimes. Tencent Holdings Ltd. dived 5 percent in pre-market trade.
The country’s Ministry of Education said the move is aimed at preventing and controlling myopia in children and teenagers, according to a statement posted on its website. The regulator for press and publications will exert controls over the number of games, it said. Netease Inc., Tencent’s closest competitor, fell 7.2 percent in New York.
The move comes amid questions over China’s plans for regulating the games industry. The government has frozen approvals of game licenses during a restructuring of department responsibilities, Bloomberg News reported this month. The halt has hurt the financial results of games companies, including Tencent.
“Parents should minimize the use of electronic products when they are with their children,” the ministry said. “The use of electronic products for non-learning purposes should not exceed 15 minutes and should not be more than one hour per day.”
Game makers also fell in Japan, where many depend on the China market for revenue. Capcom Co. tumbled as much as 7.1 percent, while Nexon Co., which gets about half its revenue from China, fell as much as 5.1 percent.
“The new rules/guidelines will create another overhang for the gaming industry’s growth outlook, adding further uncertainty on top of the hold-up of the games approval process,” Alicia Yap, an analyst with Citigroup, said in a report. But she said major gaming companies such as Tencent and Netease that had previously enacted measures to limit game-play, shouldn’t be unduly impacted over the longer term. “The sell-off could prove to be an over-reaction, especially for high quality gaming developers.”
China has the most rigorous game approval process of any major market, an extension of broader restrictions on television, newspapers and the internet. Regulators stopped approving new games several months ago, among a restructuring of ministry responsibilities.
The government hasn’t given any explanation for the freeze, which has prompted debate over whether it is a temporary halt due to the regulatory reshuffling or whether the government is planning a broader crackdown on games. The industry has been widely criticized in state-owned media.
President Xi Jinping has publicly spoken about the need to help children’s eyesight. Myopia among students is more common and is affecting children at younger ages, Xi said, according to the Xinhua News Agency this month. He called for the nation to address the problem.