China proposes new game restrictions that may change Genshin Impact and similar titles

Tencent and NetEase share value takes a massive nosedive

The Chinese government had a nasty holiday surprise for the games industry in store: New rules that have been proposed may have a massive impact on the market, depending on how they are going to be implemented.

Aimed at curbing excessive consumer spending on online games and the exploit of addictions, the rules would forbid companies from offering incentives like daily log-in rewards, awarding bonuses for purchasing in-game currency with real money for the first time, and other mechanisms that encourage higher spending. One proposed rule would force online games with lootbox or gacha mechanics to provide players with an option to buy content directly at a comparable price. The proposal also wants studios to adopt “reasonable” rates for lootbox and gacha mechanics. Total daily spending per player would have to be limited as well.

The Chinese government throwing bombs at its domestic games market, colorized, 2023 / HoYoverse

This, of course, would have the most impact on the massive mobile game market with the likes of Genshin Impact, Honkai: Star Rail, Arknights, and so on. However, games like EA Sports titles with their Ultimate Team modes would qualify as well.

Right after these proposals were posted, the shares of Chinese gaming giants Tencent and NetEase plunged in value – about 16% for Tencent and 25% for NetEase, according to Reuters. Both of these developers and publishers generally use more predatory practices in their games than HoYoverse, which is a private company, so there are no share prices to observe.

China’s government somewhat loosened its crackdown on games over the last year, which had restored a lot of confidence in the domestic market and led to growth this year – this surprising announcement changes things once again, even if the proposed rules are not implemented into law as they are written right now. That regrowing confidence has been shattered.

It’s difficult to estimate what impact these rules would have on the global market – companies already have to operate different versions of games in and outside of China, so implementing different monetization options likely wouldn’t be too difficult. That said, some of these proposed restrictions do sound very pro-consumer and could help prevent predatory behavior from some companies.

Before these rules become law, the Chinese public can comment and advise the government on the topic until January 22, 2024 – afterwards, we’ll see what’s going to be implemented and how.

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