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China to ban some monetization and engagement tactics in games

Daily log-in rewards, loot boxes for minors, auctions for in-game items among the prohibited mechanisms; spending limits also imposed

China today announced a series of planned restrictions on video game monetization and engagement tactics, according to Reuters.

The National Press and Publication Administrations released new draft rules that will ban a swath of common mechanisms in games, including daily log-in rewards, bonuses for first-time spenders, and incentives to spend repeatedly on a game.

Publishers will also be prohibited from offering loot boxes to minors or allowing for in-game items to be auctioned or used as speculative assets. Games will need to impose spending limits on players, while publishers will be required to run all their servers for Chinese games in China.

[Update]:Loot box researcher Leon Y. Xiao has also noted that one of the new requirements is that games with loot boxes must allow users to purchase the specific item they want directly as well. Additionally, should a game shut down, unspent currency must be refunded to players in real money at the rate it was originally purchased at. [/Update]

In one possible concession to the games industry, regulators would also need to rule on game approvals within 60 days of submission.

A lengthy game approval process for new releases has been an issue in China for several years. For nine months of 2021 and 2022, there was a complete freeze on approvals, no doubt contributing to the Chinese games industry seeing decreasing consumer spending on games last year for the first time in two decades.

Reuters noted that Tencent shares dropped as much as 16% and NetEase shares were down up to 25% after the rules were released.

"It's not necessarily the regulation itself - it's the policy risk that's too high," Steven Leung, executive director of institutional sales at broker UOB Kay Hian in Hong Kong told Reuters. "People had thought this kind of risk should have been over and had started to look at fundamentals again. It hurts confidence a lot."

China has imposed restrictions on the games industry repeatedly in recent years, sharply limiting minors' playtime, banning livestreaming for those under 16, and imposing stricter rules around the depictions of religion and gender.

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Brendan Sinclair avatar
Brendan Sinclair: Brendan joined in 2012. Based in Toronto, Ontario, he was previously senior news editor at GameSpot.
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