China’s Gaming Regulator Removes Proposed Spending Rules

China’s gaming regulator, the National Press and Publication Administration (NPPA), has removed the proposed rules to curb spending and rewards in video games from its website. 

The move, noted on Tuesday, follows the expiration of the consultation period for the rules on Monday, sparking speculation about potential revisions.

Unusual Removal Sparks Speculation:

The removal of the draft rules from the NPPA’s website, after having been accessible on Monday, is considered unusual by analysts. 

Some suggest it could signal the possibility of further changes in the measures, and the NPPA has not yet commented on the reason for their removal.

Market Reaction and Share Prices:

Shares of major gaming companies, including Tencent Holdings and NetEase, rose by as much as 6% and 7%, respectively, in morning trading. 

The removal of the proposed rules relieved investors, who had seen nearly $80 billion wiped off the market value of China’s two biggest gaming companies when the rules were first announced.

Draft Rules’ Background and Initial Panic:

The draft rules, proposing spending limits for online games, had initially caused market turmoil and investor panic when announced. 

The government’s intention to regulate the gaming industry added uncertainty to the market, affecting investor confidence and market valuations.

After the initial market shock, the NPPA adopted a more conciliatory tone, expressing a commitment to improving the rules based on public feedback. 

Removing the draft rules from the website is a potential step towards a more balanced and refined regulatory approach, boosting confidence in the gaming industry.

Controversial Articles and Potential Changes:

Two contentious articles in the proposed rules, Article 17 and Article 18, had caused concerns within the gaming industry. 

Article 17 aimed to ban games from forcing players into combat, while Article 18 required games to set spending limits for players. Analysts speculate on the possibility of these articles being removed or modified in the final rules.

Analysts anticipate the potential removal of Article 17 and Article 18 from the final rules. 

The government’s efforts to address negative reactions and emphasize the negotiable nature of the proposal reflect a more measured approach to gaming regulations.

Government’s Response to Public Backlash:

The overwhelming negative reaction from investors, businesses, and the public caught government officials off guard, leading to reconsidering the proposed rules. 

The government has since moderated its stance and labeled the proposal “negotiable,” reflecting an ongoing effort to contain the fallout and balance industry growth and regulatory oversight.