Why China’s video games industry is welcoming a new ethics panel

Chinese regulators have set up an online video games ethics committee that has already reviewed 20 titles, state media said, raising hopes the government is preparing to resume an approval process that has been frozen for most of this year.

China, the world’s biggest gaming market, stopped approving new titles from March amid a regulatory overhaul triggered by growing criticism of video games for being violent and leading to myopia as well as fostering addiction among young users.

The freeze on new approvals has pressured gaming-related stocks and clouded the outlook for mobile games, with industry leader Tencent Holdings reporting its first profit fall in more than a decade in the June quarter.

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But in a sign that an end to the regulatory uncertainty could be near, state-run news agency Xinhua reported late on Friday that the new games ethics committee – under the guidance of the Communist Party’s propaganda department – had already reviewed 20 games.

It had requested a revamp of 11 titles to “eliminate moral hazard”, and rejected the remaining nine, citing improper content, Xinhua added.

Industry insiders welcomed the move by the committee made up of experts on games and adolescence problems from universities, industry associations, research institutions and media outlets.

“We view this as a progressive step with more strategic directions likely to be given out by the end of this month,” financial services firm Jefferies said in a research note.

“This could potentially be followed by a timetable announcement of approval resumption before mid-2019.”

Tencent declined to comment.

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However an executive from the technology giant said on condition of anonymity: “I think the sign is, it’s almost the year end, the revamp should come to completion.”

Tencent has lost more than US$100 billion in market value since the start of the year amid regulatory uncertainty.

On Monday, the stock was down 1.2 per cent, in line with the broader market.