Tencent Problems in Online Gaming in China Have Become Worse

A new crackdown by China on online gaming has added to the worries of Tencent.

Tencent, the top internet company in China, saw its shares fall close to 5% on Friday in Hong Kong, after the Chinese government announced its plan to limit how many new online games are allowed and restrict the time that kids are able to spend playing electronic devices.

Tencent is the largest gaming company in the world with the larges part of its overall business at home in China, a market where other problems are being caused by regulators. Tencent stock has dropped close to 30% since January essentially eliminating more than $160 billion of its market value.

Authorities in China will control how many of new online games are allowed, explore an age-appropriate system that is in line with today’s national conditions, and will take measures that limit the time minors can use them, announced the Education Ministry through a prepared statement late Thursday. The ministry added that the measures were part of an effort by the government to lower nearsightedness in children as well as adolescents.

Tencent already is hurting due to increased regulations of the overall gaming industry. It reported a rare drop in profit earlier in August, blaming that drop on regulators not giving approval of licenses that allow businesses to earn money from the newest mobile games.

Martin Lau the President of Tencent while on an earnings call assured investors the new restrictions were only temporary, but the most recent announcement by the government only adds to the concerns over the restrictive environment for tech companies operating in China.

Tencent has not received the approval of authorities in China to earn money from some of its mobile games that are the most popular like PlayerUnknown’s Battlegrounds.

Regulators have also blocked Monster Hunter: World, a popular game with big sales expected. Honor of Kings, another game, received intense scrutiny in 2017 as it was accused of causing addiction amongst young people.

Tencent as well as competitor Netease, another big large game developer, will likely be more resilient to the government’s latest restriction than the smaller firms said one industry analysts.

The heavyweights in the industry already have controls introduced to regulate the amount of time younger children can spend playing.

However, the full impact of the new measures will not be known until additional details are released.