China drafts rules to cap in-game spending, ban daily login rewards

New draft rules from Chinese regulators has startled investors, leading to a $80 billion selloff of gaming stock.

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China's National Press and Publication Administrations recently published new rules that, if implemented, could disrupt the global gaming market. Concerned about the social effects of gaming, including gaming addiction, Chinese regulators passed laws to limit playtime. Now the government agency has drafted new mandates aimed at reducing the amount of money that consumers spend in digital games.

The rules, which have only been drafted and not instituted, would bite into the multi-billion dollar revenues made by Chinese companies like Tencent and NetEase. The new regulation would require Chinese companies to set a maximum cap on how much money players can spend while playing a game.

Daily login bonuses are also banned under the drafted rules. Nearly all live service games will reward players with in-game items or currency to promote engagement and long-term retention, tapping into the concept of capitalizing on fear of missing out.

The proposal has scared investors, leading to an almost $80 billion selloff across China's three gaming leaders. Tencent shares dropped 16%, NetEase made a near-28% slide, and Bilibili was down 14%.

Other parts of the rules are quite favorable to game-makers. Regulators would have to speed up the approvals process with a 60-day maximum decision period.

As Reuters reports, the Chinese government is seeking public comment on the draft through January 22, 2024.

NetEase recently opened up a handful of new satellite video games startups, including Jar of Sparks, a game dev studio helmed by Xbox LIVE creator and Halo veteran Jerry Hook, its first US-based studio Jackalope Games, and Nagoshi Studio with ex-SEGA developer and Yakuza series creator Toshihiro Nagoshi.

It remains to be seen if these Western games divisions will be affected by the sell-off.