Prosus drops 3.5% after China slashes gaming time for children

China will forbid minors from gaming more than three hours per week most weeks of the year, imposing the strictest controls yet over entertainment for youths in a blow to the world’s largest mobile gaming arena.

Gaming platforms from Tencent to NetEase can henceforth only offer online gaming to minors between 8pm and 9pm on Fridays, weekends and public holidays, state news agency Xinhua reported, citing a notice by the National Press and Publication Administration. The new rules are a major step-up from a previous restriction set in 2019 of 90 minutes per day, most days. 

The escalating restrictions on Tencent’s biggest business are likely to spook investors that had cautiously returned to Chinese stocks in recent days, exploring bargains after a raft of regulatory probes into areas from online commerce to data security and ride-hailing ignited a trillion-dollar sell-off in past weeks.

NetEase slid as much as 7% in premarket trading in New York, while Prosus, Tencent’s biggest shareholder, fell 3.5% in Europe and Johannesburg.

“Three hours per week is too tight. Such a policy will have a negative impact on Tencent too,” said Steven Leung, an executive director at  investment bank UOB Kay Hian (Hong Kong). “I thought regulatory measures would take a break gradually but it’s not stopping at all. It will hurt the nascent tech rebound, for sure.”

Tencent and other companies have said minors account for only a fraction of their businesses, especially after recent restrictions. The country’s largest games company has said the revenue from minors yields less than 3% of its gross gaming receipts in China.

Other key points in the new rules:

• All online games should be linked to a state anti-addiction system, and companies can’t provide services to users without real-name registrations;
• Regulators will ratchet up checks over how gaming firms carry out restrictions on things such as playing time and in-game purchases; and
• Regulators will work with parents, schools and other members of society to combat youth gaming addiction.

The new rules underscore the extent to which Beijing is intent on curbing gaming addiction among youths and pushing its future workforce towards more productive pursuits. Earlier in August, state media published forceful critiques of the industry and at one point labelled games “spiritual opium”. That description was later removed, but share prices plunged out of concern for further restrictions.

Tencent, which in 2018 and 2019 grappled with a widespread gaming industry crackdown that was focused on myopia among children, is also struggling with a plethora of tightening regulations in areas such as social media, online finance and commerce.

It has proactively reduced the number of hours that minors can play its games, but the company has not been nearly as restrictive as the government’s new rules. It limited minors to an hour on weekdays and no more than two hours during vacations and holidays.

“Since 2017, Tencent has explored and applied various new technologies and functions for the protection of minors,” Tencent said in a messaged statement. “That will continue, as Tencent strictly abides by and actively implements the latest requirements from Chinese authorities.”

Bloomberg. More stories like this are available on bloomberg.com