China is showing signs of easing its intense crackdown on the gaming sector

Chinese regulators have tightened controls on the domestic gaming sector over the past year and a half. But new batches of game approvals and positive steps to improve gaming addiction among children under 18 could be positive signs that the crackdown is on the wane.

Xing Yun | Cost photo | Barcroft Media | Getty Images

Beijing is showing signs that the intense crackdown on the domestic video game sector could ease, which could be optimistic for Chinese tech giants including tencent and NetEase.

On Tuesday, research firm CNG along with the China Game Industry Group Committee, which is affiliated with the gaming publishing regulator, published a report praising progress in reducing gaming addiction among people under the age of 18.

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Regulators have been concerned about game addiction among minors for some time. Last year, China’s National Press and Publication Administration introduced rules banning children under the age of 18 from playing online games for more than 3 hours a week.

The CNG report carries weight because it was published in conjunction with a key gaming industry body with links to the regulator. According to the report, more than 70% of minors play games less than 3 hours a week and the problem of underage gaming addiction has reached “a step toward a solution,” according to a translation from CNBC.

The positive report could indicate a more optimistic view of the Chinese gaming sector.

“China’s strict regulatory approach over the past year has been the result of a lack of enforcement and compliance in key areas,” Daniel Ahmad, senior analyst at Niko Partners, told CNBC. “Now that game companies are fully compliant, we see a more positive outlook emerging.”

The CNG report also credits major Chinese gaming companies, including Tencent and NetEase, for taking positive steps to enforce protection of minors.

For example, both Tencent and NetEase use facial recognition to see if the person playing the game is an adult.

Another positive sign came last week when regulators approved a batch of 70 new games for release. In China, video games require approval to be published and monetized. Among the approvals was a game titled Metal Slug: Awakening from Tencent, the company’s first commercial game license in a year and a half, according to Reuters.

Last year, China froze game approval in the summer and only started green-lit games in April this year. But titles from Tencent, China’s largest gaming company, have been missing from the lists so far.

Tencent management told analysts on its third-quarter earnings call last week that the company expects gaming licenses to be approved relatively quickly going forward, adding to further signs of regulatory oversight over the industry’s easing.

Martin Lau, president of Tencent, said the company is seeing “positive signs on the path of macro and regulatory normalization.”

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