China to ban children from playing online games for more than three hours per week

Children and adolescents under the age of 18 in China will only be allowed up to three hours per week to play online video games, according to new rules released on Monday by the National Press and Publications Administration. China.

The move is yet another blow to the country’s gaming giants, from Tencent to NetEase, which have faced a wave of regulations this year in areas ranging from anti-monopoly to data protection. This scared off investors and reduced the value of Chinese tech stocks.

According to a translated opinion on the new rules, people under the age of 18 will be allowed to play video games for one hour a day between 8 p.m. and 9 p.m. on weekends and holidays. The agency touted the rules as a way to protect children’s physical and mental health.

There are over 110 million minors playing video games in China today, and we expect the new limits to lead to a drop in the number of players …

Daniel Ahmad

Niko partners

The rules will apply to companies providing online gaming services to minors, limiting their ability to serve such users outside of designated hours. Companies will also not be allowed to provide services to users who have not logged in with a real name registration, preventing them from simply remaining ignorant of their users’ backgrounds.

The latest NPPA rules dramatically reduce the length of time minors can play online games. Under the 2019 rules, people under the age of 18 were allowed to play games for an hour and a half a day on most days.

“There are more than 110 million minors playing video games in China today, and we expect the new limits to lead to fewer players and less time and money spent. in the game by under-18s, ”Niko Partners senior analyst Daniel Ahmad said.

“However, we don’t expect the drop in spending to have a significant impact on gaming companies’ bottom line, given that time and expense limits were already in place for minors over the past two years. years. Therefore, we expect a softer impact on overall growth rates, as spending among miners was already low. “

Tencent previously said that only a small portion of gaming revenue comes from young players in China. In the second quarter, 2.6% of gross gaming revenue in China came from players under the age of 16.

U.S.-listed shares of NetEase, one of China’s gaming giants, fell 4% on Monday.

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Tencent said in a statement that it will implement the new requirements and support the new rules. The Chinese gaming giant has taken steps to anticipate regulators in recent months. In July, Tencent introduced a requirement for gamers to take a facial recognition scan on their phones to verify if they are an adult.

NetEase was not immediately available for comment when contacted by CNBC.

For a long time, Beijing has worried about gambling addiction among the country’s youth. Game consoles were banned for about 14 years until 2014. And a state-affiliated publication ran an article this month calling online games “opium” and calling for further restrictions. The article was withdrawn and republished later with a new title and references to “opium” removed. But it sparked investor concern over the possibility of further gambling restrictions.

This month, Tencent warned that it expected new regulations, but was confident it could comply.

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