Since April 2022, Chinese regulators have begun approving video games again after a months-long freeze in signs Beijing’s crackdown on gaming is easing.
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Shares of Chinese gaming companies rose Wednesday after regulators approved a slew of new games, a sign that some of the headwinds for the sector could be easing.
Tencent shares were flat in Hong Kong trade but the continuation of game approvals, which resumed in April after a monthslong freeze, has lifted other companies.
NetEase’s Hong Kong-listed shares were nearly 3% higher in afternoon trade while streaming giant Bilibili was up more than 4%. Bilibili had two games approved in the latest tranche.
Shares of Kingsoft, another publisher, were also higher in Hong Kong trade.
Meanwhile, a subsidiary of TikTok-owner ByteDance also had a game approved. Beijing-headquartered ByteDance has been making an aggressive play in the online gaming sector through acquisitions that have helped it rack up player spending.
In China, games need to be approved by regulators for release and to be monetized.
Beijing has targeted gaming as part of its intense scrutiny of technology companies over the past year and a half. Last year, China introduced rules that capped the playing time for online games for children under 18 years old to a maximum of three hours per week. Regulators subsequently froze the approval of new games for several months.
That has had a big impact on companies that rely heavily on gaming. China’s biggest gaming company Tencent posted its slowest revenue growth on record in the first quarter of this year.
But the three rounds of gaming approvals since April suggest the crackdown may be easing.
“We believe the two consecutive months of approvals should allay market concerns about industry trends,” Jefferies equity analyst Thomas Chong said in a note on Tuesday.
Chong noted that Tencent, NetEase and Bilibili are among the companies “set to benefit from more visibility on gaming approvals.”
Daniel Ahmad, senior analyst at Niko Partners, said the return of approvals to one batch per month is a “positive sign for the industry” but noted these have only been for domestic games.
“Based on historical precedent, we do expect to see the first batch of import titles approved in the near future,” referring to games developed by foreign publishers.