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Tencent spearheads $80 billion decline in value amid fears of China's crackdown on gaming industry
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Tencent spearheads $80 billion decline in value amid fears of China's crackdown on gaming industry

| @indiablooms | 22 Dec 2023, 09:43 pm

Beijing: Tencent Holdings Ltd. led an $80 billion market rout in several major Chinese online companies, following the sudden implementation of new gaming restrictions that reignited concerns about Beijing's renewed focus on the nation's vast internet sector, Bloomberg reported.

The primary gaming regulator released draft regulations on December 22 to curb practices encouraging excessive online spending and time commitment.

These rules include limitations on individual in-game expenditures, a prohibition on incentives for frequent log-ins and compelled player duels, and a ban on content violating national security.

The broad and unforeseen nature of these restrictions, unveiled on the final trading day before Christmas, drew parallels to the severe regulatory actions against the tech sector in 2021.

During that period, regulatory bodies swiftly imposed constraints on various sectors, from e-commerce to entertainment, leading to the tightening of control over companies such as Jack Ma-backed Ant Group Co. and Alibaba Group Holding Ltd., and the near collapse of the online education industry by deeming profits illegal.

Similar to the events of two years ago, the regulations announced on December 22 took the market by surprise, and their vague and sweeping nature left investors struggling to gauge the intentions and potential repercussions.

Outrage and confusion reigned discussions within a WeChat group involving hundreds of developers and designers, with many specifically criticizing the unspecified spending cap.

Chinese game developers are known for their clever designs and promotions that encourage players to invest in enhancing and personalizing their avatars, which forms the primary revenue stream for Tencent and its industry counterparts.

For a long period now, Xi Jinping's government has been actively addressing gaming addiction, blaming it for the increase in myopia among young people to online entertainment.

Chinese users spend more time online compared to many other markets and have been the force behind the popularity of services like Douyin and WeChat.

Critics have connected this trend to various societal challenges, ranging from unemployment to declining birth rates.

During the peak of the tech-sector crackdown, the government suspended approvals for new gaming titles and initiated numerous investigations into content, compelling developers such as Tencent to make adjustments to specific games.

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