Tencent’s online gaming problems in China just got worse

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What you need to know about Tencent

China is cracking down on on-line gaming, including to worries for Tencent.

Shares within the high Chinese language web firm plummeted greater than 5% in morning buying and selling in Hong Kong on Friday, after Beijing introduced plans to restrict the variety of new on-line video games and limit the period of time youngsters spend enjoying on digital gadgets.

Tencent (TCEHY) is the world’s largest gaming firm with an enormous a part of its enterprise in China, a market the place it was already dealing with different issues attributable to regulators. Its inventory has plunged practically 30% since January, wiping out greater than $160 billion in market worth.

Chinese language authorities will “management the variety of new on-line video games, discover an age-appropriate reminder system consistent with nationwide situations, and take measures to restrict the use time of minors,” the Schooling Ministry introduced in a press release late Thursday. It stated the measures are a part of a authorities effort to scale back nearsightedness in youngsters and adolescents.

Tencent is already hurting from elevated regulation of the gaming trade. The corporate reported a uncommon decline in revenue earlier this month, blaming the drop primarily on regulators not approving licenses that enable firms to earn cash from new cell video games.

Throughout an earnings name, Tencent President Martin Lau assured traders that the restrictions have been momentary. However the newest authorities announcement provides to considerations about an more and more restrictive atmosphere for tech corporations in China.

tencent gaming arena of valor RESTRICTED
China is the world’s largest gaming market.

Tencent has nonetheless not gained approval from Chinese language authorities to earn cash from a few of its hottest cell video games equivalent to “PlayerUnknown’s Battlegrounds.” Regulators additionally blocked a sport referred to as “Monster Hunter: World” for which huge gross sales have been anticipated. One other sport, “Honor of Kings,” got here below intense scrutiny final 12 months for allegedly inflicting dependancy in younger individuals.

Tencent and Netease (NTES), one other main sport developer, needs to be extra resilient to the brand new restrictions than smaller corporations, in line with Karen Chan, an analyst at funding financial institution Jefferies. The trade heavyweights have already launched management methods to manage how a lot time youngsters spend enjoying their video games, she stated in a be aware to traders.

However Chan acknowledged that the affect of the brand new measures on Tencent and others will not change into clear till extra particulars are introduced. Questions stay over what the restrict will probably be on the variety of new video games, how it will likely be carried out and whether or not it should additional delay the approval course of, she stated.

The ministry’s announcement additionally took purpose at mother and father and educators, saying they need to scale back the time youngsters spend on smartphones and tablets and encourage youngsters to play and train outdoors for at the least an hour a day.

China is the world’s largest gaming market, accounting for 1 / 4 of worldwide income, in line with market analysis agency Newzoo. The agency forecasts China’s whole gaming income will attain $38 billion in 2018.

— Catherine Wang contributed to this report.

CNNMoney (Hong Kong) First printed August 30, 2018: 11:59 PM ET

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