Chinese Tencent imposes controls to fight gambling addiction in children

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Updates on Chinese Business and Finance

Tencent announced new restrictions on how long minors can play its games online after the Chinese internet group came under intense pressure from state media, which called the games ” spiritual opium “.

In a social media post, the company said it was introducing the measures after “competent authorities” demanded greater protection for minors in gambling and companies fulfilling their “social responsibility”.

Shares of Tencent, whose online gaming business generated Rmb 39.1 billion ($ 6 billion) in the first quarter and accounted for 30% of its total revenue, fell 10.8% in Hong Kong before reduce losses by 6.6%. .

That left the title down almost a quarter over the past month. The company’s market value fell $ 400 billion from its January high.

The renewed volatility came after Chinese tech stocks experienced their worst month since the global financial crisis in July following an unprecedented regulatory campaign against tech sectors including education, ridesharing and social media.

Tencent’s new restrictions, which will initially only apply to its flagship title Honor of kings, will further reduce the length of time minors are allowed to play each day from 1.5 hours to 1 hour normally and from 3 hours to 2 hours on public holidays. The company will ban anyone under the age of 12 from spending in the game and will crack down on minors playing on adult accounts.

Tencent also raised three industry-wide proposals, including strengthening systems to tackle gambling addiction and called for consideration of a comprehensive ban for children under 12.

The Chinese internet giant’s announcement came after an article in Economic Information Daily, which is run by state-run Xinhua News Agency, said online video games have become ” spiritual opium worth hundreds of billions “. One expert warned that “no industry. . . can develop in a way that destroys a generation ”.

The article published Tuesday morning did not mention Tencent by name, but complained of widespread internet addiction among Chinese youth. He quoted anonymous students as saying that some of their classmates spent up to eight hours a day at Honor of kings and warned that this “new kind of electronic drug” “is advancing in leaps and bounds”. In the afternoon, the newspaper had deleted the article.

The historically charged comparison, comparing Chinese video game makers to foreign opium peddlers whose trade contributed to the disintegration of Imperial China, crushed Tencent’s stock even though miners contributed only 6% of its gaming revenue in China in the last quarter of last year.

A person familiar with the situation said the article was intended to “test the waters” and was perhaps more extreme than the position of regulators, leading to its removal.

But Li Chengdong of tech-focused think-tank Haitun said Tencent needs to respond quickly because the article may represent the point of view of some officials. “The Internet industry is under fire and businesses are nervous,” Li said.

Gaming peers NetEase and XD ended Tuesday’s session down about 8% each. The Chinese video game market was worth $ 43.1 billion in 2020, according to Niko Partners, a research and consulting firm.

The pressure on Tencent follows advice released Monday night by the Chinese Communist Party’s propaganda department and other regulators targeting rival tech group ByteDance.

Regulators have said they will review and modify online recommendation algorithms to ensure they aren’t serving “bad content,” raising the possibility that authorities may act to change the underlying programming that has helped Douyin, the sister app of TikTok in China, to become a champion of the booming short video industry.

The latest regulatory measures also weighed on shares in Shanghai and Shenzhen, which have stabilized in recent days following a conference call in which the Chinese securities regulator sought to reassure global financial groups and national authorities on Beijing’s relentless crackdown on the sector.

In recent weeks, Beijing has called for a new overseas listing regime, imposed data security reviews on companies seeking to sell shares overseas, and banned the country’s private tutoring industry from carrying out profits of $ 100 billion. This made the three largest companies in the industry “practically non-investable”, according to analysts at JPMorgan.

Analysts said pressure from regulators and state media on Tuesday signaled a new challenge for Tencent, which controls the country’s ubiquitous social networking and payments app WeChat and had until recently survived the relatively unscathed regulatory assault.

That changed abruptly last week, when the company announced it was stopping all user registrations for WeChat as it upgraded its security technology to “align with all relevant laws and regulations.” Tencent’s stock has fallen nearly a quarter over the past month.

“The timing of the article is certainly raising concerns among investors due to the crackdown we have seen recently [on Chinese tech]”said Daniel Ahmad, senior analyst at Niko Partners.

But he added that it was not the first time that games had been compared to drugs in China. The article’s publication also followed rules that came into effect on June 1 that require companies to verify the age and identity of players in order to limit the time minors spend playing.

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