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China's regulatory actions lead to drastic gaming market decline

China's regulatory actions lead to drastic gaming market decline Photo: China's regulatory actions lead to game market decline (GettyImages)

The Chinese government's imposition of new gaming regulations led to an $80 billion selloff in major Chinese online companies, reigniting fears of a renewed crackdown on the country's tech sector, according to Bloomberg.

Shares of Tencent, one of the world's largest gaming companies, plunged 12.4%, marking its worst day since 2008 and wiping off 367 billion Hong Kong dollars ($47 billion) in market value.

NetEase, another gaming giant, saw a 25% decline, its biggest since listing in Hong Kong, resulting in a 128 billion Hong Kong dollar ($16.4 billion) loss in value.

Both Bilibili and Kuaishou, who are involved in online gaming, also experienced significant drops.

The new regulations, aimed at curbing gaming addiction and excessive spending, include spending limits, banning certain in-game rewards, and prohibiting high-value virtual goods trading.

This sudden regulatory action has alarmed investors and industry players, recalling the severe tech-sector crackdown of 2021 that targeted various sectors and significantly impacted market values.

Regulatory crackdown

China's ongoing crackdown on the online gaming industry began in late 2020. It is part of a broader regulatory onslaught targeting powerful tech companies and aims to address issues like gaming addiction among youth and the dominance of big tech firms.

Previous actions have included suspensions of game approvals starting around 2018 and freezing new title approvals to combat gaming addiction and its social consequences.

This crackdown has led to over $1 trillion being wiped off the market value of Chinese companies globally.

The new regulations continue this trend, reflecting the government's tightening grip on tech companies and its efforts to control the influence and expansion of the private sector, particularly in areas like online entertainment.

The regulations' vague nature and broad scope have caused uncertainty and fear among investors, contributing to the dramatic market response.