Tencent and NetEase shares fall as China urges end to profit focus in gaming
Games industry updates
Sign up to myFT Daily Digest to be the first to know about Games industry news.
Shares in Tencent and NetEase fell sharply on Thursday after authorities ordered the Chinese technology companies to move away from a focus on profit in online gaming.
The country’s two leading gaming companies were on Wednesday summoned for talks in Beijing, where top officials asked them to “profoundly understand the importance and urgency of preventing minors from online game addiction”, according to Xinhua, the state news service.
Hong Kong-listed shares in NetEase and Tencent dropped as much as 7.7 and 4.8 per cent, respectively, on Thursday, while the Hang Seng Tech index fell 3 per cent.
The moves followed a sell-off in New York-listed Chinese tech shares. The Nasdaq Golden Dragon index of large US-listed Chinese stocks closed 3.4 per cent lower, its worst performance in more than three weeks.
The meeting in Beijing marked the latest attack by authorities on China’s tech sector after shares in the sector had experienced a tentative recovery as the steady drumbeat of punitive measures slowed following Beijing’s announcement in late August that it would limit children to three hours of gaming a week.
But the Chinese Communist party’s Publicity Department and government regulators, including the National Press and Publication Administration, renewed the regulatory pressure.
They urged online gaming companies “to break from the solitary focus of pursuing profit or attracting fans and other erroneous tendencies, and change game rules and designs inducing addictions”, according to Xinhua.
Ke Yan, an analyst with DZT Research who writes on the Smartkarma platform, said the move was the latest step in the government’s “continuous effort of fine-tuning the online game industry”.
“No details were given how they are going to stop the dominance of Tencent and NetEase,” Ke said, adding that the guidance around preventing monopolistic behaviour “impacts the big players”.
Tencent, which has come under regulatory pressure over its lucrative Honor of Kings mobile game in recent months, said it took the physical and mental health of minors “very seriously”.
“We appreciate the guidance and instruction from the relevant regulators, and will work hard to be in full compliance with all rules relating to youth game addiction and content regulation,” the company said.
NetEase said it planned to “strictly follow” anti-addiction rules and instructions in regards to gaming for minors. “We seek to build and promote a wholesome gaming environment in China,” the company said.