While China’s economy sputters amid a number of economic crises, recently tabled legislation by the Chinese Communist Party (CCP) threatens to upend a rare bright spot.
China’a video gaming industry is raking in cash, employing thousands and, in the current environment, is continuing to grow.
According to Statista, revenue in China’s video games market is projected to reach US$109.20 billion this year. The largest market in the industry is mobile games, which has a 2023 market volume of US$81.90 billion.
User penetration is around 52 percent, a metric that is expected to surge to 57.5 percent by 2027 and the average revenue per user (ARPU) in the industry is projected to amount to US$143.80 per person in 2023.
As a result, a number of video games are logging revenues in the tens, if not hundreds of millions per month.
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The mobile game, Honor of Kings, unofficially translated as “King of Glory” is a multiplayer online battle arena developed by TiMi Studio group and published by Chinese tech giant Tencent games.
As of May 2023 the game, China’s most successful by revenue, was attracting monthly revenues in excess of US$115 million.
Trailing far behind, but still wildly successful are other games including Honkai: Star Rail and PUBG Mobile, each raking in over US$37-million per month in revenues.
A number of other games all bring in monthly revenues in excess of US$20 million.
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China’s mobile game industry at risk
With this level of success, and amidst a number of economic challenges, one would think communist authorities would, at a minimum, work to protect the industry. However this is far from the case.
China’s Cyberspace Administration (CAC) has drafted new rules that, if implemented, may decimate the industry.
The rules target all mobile users under the age of 18 in China by placing strict limits on mobile phone screen time.
According to the CAC, children under the age of three should only be exposed to songs and audio-focused content, while those between the ages of 12 and 16 years of age can be exposed to more educational and news content.
The draft legislation says that children under eight-years-old should only have 40 minutes of mobile phone screen time a day and those over the age of eight, but under 16, can use their phones an hour a day.
For those between the ages of 16 and 17, a maximum of two hours of smartphone screen time per day is allotted.
As of December 2019, 34 percent of all mobile users in China were between the ages of 16 and 24, meaning that restricting usage for all users under the age of 18 will undoubtedly negatively impact revenues for mobile game developers.
China has also implemented a crackdown on video games in general, seeking to limit the time spent by the country’s youth playing games, however researchers have recently questioned its effectiveness.
A study, published in Nature on August 10, found no evidence that China’s limit on playing games online reduced lengthy play.
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China’s crackdown on its tech sector
China began its crackdown on its tech industry in November 2020, when it quashed Ant Group’s initial public offering (IPO). Ant Group is an affiliate company of China’s Alibaba Group, which owns the world’s largest mobile payment platform, Alipay.
Over the past few years, communist authorities also hit tech giants Tencent, Meituan and Didi, a ride sharing company.
The crackdown came after authorities began to fear that the country’s major internet platforms were becoming too large and powerful and may threaten its rule.
According to the South China Morning Post (SCMP), the crackdown “wiped out trillions of dollars in market value from Chinese tech companies, kneecapped one of the most dynamic sectors in the world’s second largest economy and accelerated US-China decoupling.”
Over the past two-and-a-half years communist authorities have implemented a number of measures aimed at corralling its tech sector and levied massive fines on companies.
In October, 2021, China fined Meituan 3.4 billion yuan, or US$ 470 million, for abusing its dominant market position by using what it referred to as a “pick one from two” scheme that forced merchants into exclusive deals.
In July this year, communist authorities fined Ant Group a staggering 7.1 billion yuan, or US$ 970 million, for violating rules related to “corporate governance and financial consumer protection.”
Some industry experts believe that the unprecedented fine marks the end of the communist authorities crackdown on the tech industry.
Recently, at a symposium, Chinese Premier Li Qiang offered support to China’s tech giants, praising Alibaba, Tencent and Meituan for their contributions to the country’s growth.