Tencent promises fresh curbs after China media calls online gaming ‘spiritual opium’

Logos of Tencent are displayed at a news conference in Hong Kong, China March 22, 2017. REUTERS/Tyrone Siu

China’s Tencent Holdings Ltd said on Tuesday it would curb minors’ access to its flagship video game, hours after its shares were battered by a state media article that described online games as “spiritual opium”.

Economic Information Daily cited Tencent’s “Honor of Kings” in an article in which it said minors were addicted to online games and called for more curbs on the industry. The outlet is affiliated with China’s biggest state run news agency, Xinhua.

China’s largest social media and video game firm saw its stock tumble more than 10% in early trade, wiping almost $60 billion from its market capitalisation. The stock was on track to fall the most in a decade before trimming losses after the article vanished from the outlet’s website and WeChat account.

The broadside comes days after the securities regulator and state media sought to soothe investor fears over the pace and breadth of market reform that sparked a selloff in technology and private education. The CSI300 index last week fell more than 5% for its biggest monthly loss since October 2018.

The attack on the video game sector put investors back on edge.

“News once again caused market concerns about industry regulation,” said Everbright Sun Hung Kai analyst Kenny Ng.

“Under this circumstance, it is expected that game stocks and even the overall technology stocks will still face continuous adjustment pressure,” he said, adding focus will shift to whether firms change their policies for minors’ access.

In the article, the newspaper singled out “Honor of Kings” as the most popular online game among students who, it said, played for up to eight hours a day.

“No industry, no sport, can be allowed to develop in a way that will destroy a generation,” the newspaper said, likening online video games to “electronic drugs”.

Tencent in a statement said it will introduce measures to reduce minors’ access to and time spent on games. It also called for an industry ban on gaming for children under 12 years old.

The company did not address the article in its statement, nor did it respond to a Reuters request for comment.

The article also hit rivals’ shares. NetEase Inc dropped more than 15% before paring losses to sit around 8% lower in late afternoon trade. Game developer XD Inc fell 8.2% and mobile gaming company GMGE Technology Group Ltd dropped 15.6%.

Outside of gaming, investors were also caught offguard by the State Administration For Market Regulation (SAMR) on Tuesday saying it would investigate auto chip distributors and punish any hoarding, collusion and price-gouging. The semiconductor stock index subsequently fell more than 6%.

CHILD WELLBEING

A separate opinion piece published by the China News Service on its official Twitter-like Weibo account hours after the Economic Information Daily article took a different tone, saying that blame could not be placed on any one party, including game developers, for child addiction to online video games.

“Schools, game developers, parents, and other parties need to work together,” said the news outlet, which is also state-run.

Chinese regulators have since 2017 sought to limit the amount of time minors spend playing video games and companies including Tencent already have anti-addiction systems that they say cap young users’ game time.

But authorities have in recent months placed fresh focus on protecting child wellbeing, and said they want to further strengthen rules around online gaming and education. Last month, they banned for-profit tutoring in core school subjects, attacking China’s $120 billion private tutoring sector.

That added to other regulatory action in the technology industry, including a ban on Tencent from exclusive music copyright agreements and a fine for unfair market practices.

At one point on Tuesday, Tencent was briefly de-throned as Asia’s most-valuable firm by market capitalisation by chipmaker Taiwan Semiconductor Manufacturing Co Ltd.

“It showed how investors are jumpy these days. They don’t believe anything is off limit and will react, sometime over-react, to anything on state media that fits the tech crackdown narrative,” said Ether Yin, partner at Beijing-based consultancy Trivium.

“Government will not and can not get rid of the gaming industry… Restrictions will stay but not much room to go tighter,” he said.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.