Tencent loses $60 billion as China’s game crackdown escalates

Chinese regulators called on industry executives on Wednesday to break their “monogamous focus” on profits and instruct minors to stop becoming addicted to the games, according to the official Xinhua News Agency.

Regulators also said China would slow approval for all new online games, the South China Morning Post reported on Thursday, updating an earlier report that said there was a freeze on approval.

Reports intensified the stock selloff that began in the morning, although Xinhua made no mention of the approval suspension. Investors are already on edge due to a ten-month government campaign to rein in industries ranging from e-commerce and ride-hailing to social media.

Xi Jinping’s administration is running a concurrent campaign to curb drug addiction among minors, reduce rising spending on virtual goods, and inspire youth to pursue more productive entertainment. The government just last week issued new rules for the industry, limiting the amount of time children play video games to three hours a week.

A moratorium on new titles would increase gaming crackdowns, directly affecting developers’ wallets. It recalls a ten-month moratorium on game monetization licenses in 2018, then aimed at combating addiction and myopia in children. This prompted Tencent’s first profit decline in at least a decade and helped wipe out nearly $200 billion from its market value at one point.

On Thursday, Tencent narrowed the loss to 8.5% in late afternoon trading, its biggest drop since July. NetEase fell 11%. The US trading day continued to decline, with US nonexclusive realizations of both companies down nearly 4%, as markets opened in New York. Representatives for the companies did not immediately respond to requests for comment. Prosus NV, Tencent’s biggest shareholder, fell 6.6% in Amsterdam, while parent Naspers Ltd. Johannesburg fell to 8.3%.

Meanwhile, Tencent’s much-anticipated League of Legends mobile title will not launch on September 15 as initially anticipated because “the gaming experience needs to be improved”, according to a notice posted on the game’s official Weibo page. Will go on till after the test. National Day holiday in October, the notice said without elaboration.

Officials from the Communist Party’s propaganda department and industry regulator disclosed their decision to Tencent and Netease executives at Wednesday’s meeting, the South China Morning Post reported, citing a person with information on the matter.

A previous version of the SCMP report stated that gaming approvals have been put on hold while the government figures out how to reduce the number of titles in the market, especially after the frantic pace of the first half.

Investors have been increasingly nervous about the gaming sector since August, when Chinese state media denounced the games as the “spiritual opium,” prompting Tencent to impose restrictions on children. While various newspapers retracted that comment, saying it was an over-statement, the concern is that Beijing will next focus its attention on an area that is likely to move from Tencent to Apple Inc. And Activision is critical to the bottom line of media giants up to Blizzard Inc.

Broadly speaking, Beijing’s campaign to rein in its vast Internet industry is approaching its 11th month, a roller-coaster test that began when regulators began investigating Alibaba Group Holding Ltd., Tencent, before Jack The record IPO of Ma’s Ant Group company was shattered. -backed food delivery giants Meituan and Didi Global Inc.