China Introduces New Regulations on In-Game Monetization and Engagement Strategies

The Chinese government has unveiled a set of stringent regulations aimed at curbing certain monetization and engagement practices in the video game industry, as reported by Reuters. The National Press and Publication Administration has drafted new rules that prohibit various common mechanisms, including daily login rewards, bonuses for new spenders, and incentives for repeat spending. Additionally, game publishers will be barred from offering loot boxes to minors or allowing the auctioning of in-game items. Games will be required to impose spending limits on players, and publishers must operate their servers for Chinese games within China. Furthermore, games featuring loot boxes must provide users with the option to purchase specific items directly. In the event of a game's shutdown, unspent currency must be refunded to players in real currency at the original purchase rate. In a potential concession to the gaming industry, regulators will be required to review game approval submissions within 60 days. This move comes after a lengthy game approval process has plagued the Chinese gaming industry for years, with a nine-month freeze on approvals in 2021 and 2022 contributing to a decline in consumer spending on games for the first time in two decades. The new regulations have already had an impact, with Tencent shares dropping up to 16% and NetEase shares down by as much as 25%. According to Steven Leung, executive director of institutional sales at UOB Kay Hian in Hong Kong, the policy risk is too high, hurting investor confidence. China has repeatedly imposed restrictions on the gaming industry in recent years, including limits on minors' playtime, bans on livestreaming for those under 16, and stricter rules governing the depiction of religion and gender.