Hong Kong/San Francisco — China long celebrated Tencent Holdings as a national champion. Now, the tech giant is getting a taste of what it’s like to be on the other side of government patronage. Tencent tumbled on Thursday after reporting its first profit drop in a decade as Chinese authorities froze approval of digital games the company needs to make money. Once the most valuable company in Asia, Tencent has seen its market cap fall by more than $165bn since January.

Tencent executives acknowledged a regulatory shakeup is interfering with the introduction of new games, then tried to reassure investors any delays would be temporary. But the lack of direct comment from Beijing left analysts questioning whether the company itself had real clarity. The government may be suffering a mere bureaucratic snafu, but it could also be planning broader restrictions on gaming, long controversial within the Communist Party. "It’s quite a big mess," said Serkan Toto, CEO of Tokyo-based game ...

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