• Tech giant’s shares plunge after paper calls for curbs on online gaming
• Shares edged back slightly after group agreed to cut minors’ hours of access
Tencent Holdings Ltd shares took another battering on Tuesday after a Chinese state media outlet branded online video games “spiritual opium.”
China’s biggest social media and video game firm saw its stock tumble more than 10% in morning trade, wiping almost $60 billion from its market capitalisation, amid concern that the gaming sector may be the next target of national regulators.
Shares of rival NetEase slumped as much as 16%, while those of game developer XD Inc and mobile gaming company GMGE Technology Group Ltd also plunged.
But its stock clawed back some of the losses after the lunch break, when Tencent said it would curb minors’ access to its flagship video game, shortly after its shares suffered their worst fall in a decade.
The state-run Economic Information Daily said in an article on Tuesday that many teenagers 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.
The newspaper repeatedly cited Tencent’s flagship game, “Honor of Kings”, which it said was the most popular online game among students who sometimes 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 said later that it would restrict access to ‘Honor of Kings’ for children under 12 years of age. Its shares rose after the announcement but were still down 6.11% at the close of trading in Hong Kong.
“[The share price moves] show how investors are jumpy these days. They don’t believe anything is off-limit and will react, sometimes over-react, to anything on state media that fit the tech crackdown narrative,” Ether Yin, a partner at Beijing-based consultancy Trivium, commented.
“[But] government will not and cannot get rid of gaming industry. The official line continues to be keeping the kids from getting addictive to games. And that’s been the policy of the land since 2018. The industry is already subject to heavy regulations, like annual quota of new games and restricting amount of time minors can play games. Those restrictions will stay but [there’s] not much room to go tighter.”
However, officials in Beijing have vowed to strengthen rules around online gaming and education to protect child well-being. Last month, the government banned for-profit tutoring in core school subjects, a move that threatens to decimate China’s $120 billion private tutoring sector.
In online video games, authorities have sought to limit hours that teenagers can play, and companies including Tencent have implemented anti-addiction systems that they say cap young users’ game time.
The Economic Information Daily, citing legal experts and professors, said current curbs were not able to keep up with the sector’s development to prevent youth addiction, and that there should be more “mandatory means” to increase the social responsibility of video game companies.
Tencent has already been under pressure alongside major technology peers by increased regulatory action on online platforms. Last month, it was barred from exclusive music copyright agreements and fined for unfair market practices.
Market sentiment has been rocked by the recent regulatory crackdown and news that the Delta variant of the coronavirus is spreading in China, with 11 million citizens in Wuhan reportedly due to be tested over coming days.
This report was updated with further details on August 3.
It was also updated to make minor stylistic adjustments.