China likely to lift foreign game console ban

China is expected to soon end a 13-year ban on the sale of gaming consoles with only one key condition: foreign firms like Sony, Nintendo and Microsoft must make their products in Shanghai’s new free trade zone.

The milestone move is part of a detailed policy blueprint for a “Shanghai free trade zone”, endorsed by Premier Li Keqiang, who is keen to make Chinese economy more open to the rest of the world and to make its currency more widely used.

Chinese-language government documents on the policy package said that if foreign companies agreed to register in the new free trade zone in Shanghai, they would be allowed to promote and sell their products in the domestic mainland market after seeking approval for specific products from “culture-related authorities”, the sources who reviewed the documents told the South China Morning Post on Wednesday.

“They still need approval from the culture ministry and other relevant government bodies for their products, which I think is reasonable, because the government wants to make sure the content of your games is not too violent or politically sensitive for young people,” said one of the sources. The sources declined to be named before an official announcement is made about the new rules for Shanghai’s free trade zone.

In June 2000, seven central government ministries, led by the Ministry of Culture, jointly issued a notice to ban the production and sale of game consoles in China, with the only exception of importing components to be assembled in Chinese factories and then exported to foreign markets. At that time, the government was concerned about unhealthy and in particular violent content of video games that may harm the "mental health" of Chinese youths.

Although Sony’s well-known PlayStation and Nintendo’s Wii video game consoles - in particular their various game software - are not yet allowed officially to be made and sold in China, young Chinese gaming fans already have access to these video game consoles and thousands of their gaming software through black market retail channels and pirate disk shops around the vast nation.

The so-called “Big Three” major game console platforms are currently assembled by major contract electronics manufacturers on the mainland.

Taiwan-based Hon Hai Precision Industry, which is widely known under its Foxconn trade name, makes the Wii for Nintendo. Hon Hai is the world’s largest electronics manufacturing services provider, with about 1 million workers on the mainland.

Flextronics, the world’s second-biggest electronics contract manufacturer, makes the Xbox for Microsoft. It is not known which contractor will supply the recently announced PlayStation 4 for Sony. The previous model, the PlayStation 3, was made by Sony, Hon Hai and Pegatron.

When asked for reaction to the apparent relaxation of the current rules, a spokesman for Sony Computer Entertainment Hong Kong said: “We recognise that mainland China is a promising market. We will continuously study the possibility, but there is no concrete plan at this stage.”

Ralph Haupter, the chairman and chief executive at Microsoft Greater China, told the Post last month that the company was working to address the legal requirements to enable the release of its new Xbox One console on the mainland.

Nowadays young Chinese increasingly like playing games on Apple’s popular mobile devices including iPads and iPhones, which are assembled in China and sold across the country legally because they are not considered gaming products.

“The Shanghai free trade zone plan is strongly supported by Premier Li, who wants to improve China’s image as opening further to business under the new leadership (of Premier Li and President Xi Jinping),” another source said. “You may think the game console is a small deal in the whole policy package for Shanghai, but it’s an interesting instance showing how China wants to open up to foreign investors.”

On July 3, the State Council, China’s cabinet, issued a statement after a meeting chaired by Li that the free-trade zone in Shanghai would be a snapshot of an “upgraded Chinese economy”.

The Post already exclusively reported this week that foreign banks would find a shortcut to set up wholly-owned subsidiaries and foreign commodities exchanges would be allowed to establish their own futures delivery warehouses in the new zone.