China is showing signs of easing its heavy crackdown on gaming

Chinese regulators have increased scrutiny of the domestic gaming sector over the past year and a half. However, new batches of game approvals and positive steps to improve gaming addiction among children under 18 could be positive signs that the crackdown is easing.

Xing Yun | Costfoto | Barcroft Media | Getty Images

Beijing is showing signs that a heavy crackdown on its domestic video game sector could be eased, which could be a boon for Chinese tech giants including Tencent and NetEase.

On Tuesday, research firm CNG along with the China Game Industry Group committee, which is affiliated with the gaming issuing regulator, released a report praising progress in reducing gaming addiction among under-18s.

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Regulators have long been concerned about the addiction of minors to gaming. Last year, China’s National Press and Publication Administration enacted rules restricting children under 18 from playing online games for more than 3 hours a week.

The CNG report carries weight because it has been published in conjunction with a key gaming industry body with links to the regulator. The report said that more than 70% of minors play games for less than 3 hours a week, and the problem of minors’ gaming addiction “has achieved a step toward resolution,” according to a CNBC translation.

The positive report could signal a more bullish outlook for the Chinese gaming sector.

“China’s strict regulatory approach over the past year has been a result of a lack of enforcement and compliance in key areas,” Daniel Ahmad, senior analyst at Niko Partners, told CNBC. “With game companies now fully compliant, we’re seeing a more positive outlook begin to develop.”

The CNG report also singles out major Chinese gaming companies, including Tencent and NetEase for their positive moves to enforce the protection of minors.

For example, both Tencent and NetEase use facial recognition to see if the person playing the game is an adult.

Another positive sign came last week, when regulators approved a batch of 70 new games for release. In China, video games need approval to publish and monetize. Among the approvals was a game called Metal Slug: Awakening from Tencent, marking the company’s first commercial game license in a year and a half, according to Reuters.

Last year, China froze game approvals in the summer and only started green-lighting games in April this year. But titles from Tencent, China’s biggest gaming company, have been absent from the lists so far.

Tencent’s management last week told analysts during its third-quarter earnings call that the company expects game licenses to be approved relatively quickly going forward, adding further signs of regulatory scrutiny loosening the industry.

Martin Lau, chairman of Tencent, said the company sees “positive signals on the path of macroeconomic and regulatory normalization.”

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