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Investors Business Daily
Investors Business Daily
Business
MIKE JUANG

NetEase, Chinese Game Developers Tumble On New Government Crackdown

NetEase and other Chinese gaming players such as Tencent and Bilibili plunged after the Chinese government announced new video game regulations that hope to reduce the time and money spent by players on gaming.

China's National Press and Publication Administration, which oversees video games in the country, proposed the new rules to curb in-game spending by players, which also include banning minors from tipping livestreamers, according to multiple sources. But the largest change in game regulations comes from its new reduction in the amount of time and duration minors can use online games, a growing industry for China's tech economy.

Investors fear the regulations will hamstring China-based video game developers by directly restricting profitable, pay-to-play game mechanics like "loot crates" or login rewards. Such mechanics have found traction in smartphone video games.

NetEase stock plunged  more than 20% before Friday's market open, signaling a sharp drop below the 200-day line. BILI stock sank 11%.

TCEHY stock, which trades over the counter in the U.S., is not yet active. But Tencent Holdings plunged 12% in Hong Kong trading.

The moves come as the center of gravity for gaming shifts to China, which is seen as a unique, largely untapped market that's more accustomed to smartphone gaming.

The fresh restrictions on video gaming raises concerns about renewed crackdowns on e-commerce giants and even for-profit education stocks. Alibaba and JD.com sank about 2% early Friday. New Oriental Education tumbled 9%.

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