China said to halt ‘green channel’ approval process for new games, as market awaits revamped regime
- Licences are no longer being granted through a process known as the ‘green channel’, used for testing both domestic and foreign games
- Still unclear how the process will change after the Communist Party finishes its overhaul of approvals
China’s regulators have ended the issuance of video game licences through a stopgap approval process, people familiar with the matter said, closing the last known official path for making money from new titles in the world’s biggest gaming market.
Licences are no longer being granted through a process known as the “green channel", used for testing both domestic and foreign games, said the people, who asked not to be identified because the matter is private. The approval mechanism had been in place since at least August, following the government’s decision earlier this year to restructure how it reviews video games for violence, gambling and sensitive topics.
The new restrictions in the US$38 billion market threaten the fortunes of video game companies such as Tencent Holdings and NetEase, and add to the uncertainty about the Communist Party’s long-term plans for regulating the industry. The previous crackdown, which affected online, mobile and console games, also hit China’s Bilibili, while Japan’s Capcom, Nexon and Konami Holdings Corp all saw their shares decline. Hong Kong-listed Tencent has lost US$156 billion in market value this year, more than any other company worldwide.
While it is unclear why Beijing has shut that window, the government has stepped up its oversight of an industry it sees fomenting addiction, myopia and other ills among the country’s youth. Some analysts had anticipated that the broader freeze would end by September. They had seen the green channel as a temporary solution to carry the industry until then.
Tencent shares reversed gains and fell as much as 2.1 per cent, to the lowest level in two weeks.
Fortnite, this year’s hottest title, was among the games Tencent was seeking to push through the green channel, President Martin Lau Chi-ping told investors in August. The procedure meant that “you can actually have a one-month monetisation testing", he said. “That is acted as a relief for the entire industry.”