It has been a wild year for China’s video gaming market. Stocks took a dive in August following an editorial lambasting internet games as “spiritual opium”. Then Beijing placed additional restrictions on the amount of time children can spend playing games – just three hours most weeks – again battering tech stocks, especially those of Tencent Holdings and NetEase . Since then, things have calmed down a little. It turns out that many children are still finding ways around ever tightening restrictions , often with parents’ help, and China’s industry behemoths are still raking in tons of cash on the popularity of their titles. Tencent finally got a China release in the fall for the long-awaited mobile version of League of Legends , but new game licenses were effectively frozen after July. Video games have simply become more important to China’s economy, despite long-standing hostility from Beijing regulators. Some of that antagonism was in response to distrust from parents in the early 2000s, but there is also a more deep-seated wariness of the medium. China limits gaming time for under-18s to one hour a day on weekends only Here is a look at where that hostility comes from, how it led to China’s current video gaming restrictions, and what it means for the industry going forward in the world’s second-largest economy. What does China have against video games? The Chinese government’s antipathy towards video games goes back to that term used by state media in August: spiritual opium. The term has a long history in China, and has traditionally been used when railing against foreign cultural products. In 1961, Communist Party mouthpiece People’s Daily published an article referring to American books and films as spiritual opium, calling it “ideological poisoning” worse than literal drugs. Concerns about video games started to take hold in the early 2000s. Worries about the impact of online games came hand in hand with fears of internet addiction, which Marcella Szablewicz, a researcher of Chinese video game culture, said in her book Mapping Digital Game Culture in China had many of the hallmarks of a moral panic. This included stereotypical depictions in news media and “moral entrepreneurs” trying to capitalise on public fear. As in the US, concerns about video games solidified around a real-world tragedy. In 2002, the country experienced what the scholar Henry Jenkins referred to as the “Chinese Columbine”. Two boys, 13 and 14 years old, set fire to an internet cafe in Beijing after being thrown out. It killed 25 people and severely injured another 17. The result was an outpouring of anger over internet and video game addiction. For many years, internet cafes were popular with people in China looking to access many different PC games at no extra cost beyond the charge for time spent on the computers. But in 2007, the government passed the Protection of Minors Law, barring internet cafes from serving people under 18. To this day, the Chinese government routinely raises the alarm about anything perceived as contributing to public lethargy, and thus hindering the country’s “great rejuvenation”. Internet trends such as “ lying flat ” and “ touching fish ”, promoting a more lackadaisical approach to work that eschews the vicious competition of climbing the corporate ladder, have become a target of state media. Video games, as a form of escapism, are occasionally blamed for contributing to these trends. Chinese President Xi Jinping again raised the issue this year at the “ two sessions ”, the country’s biggest annual political gathering. Gaming and “other dirty and messy things online” could negatively affect minors because they are not psychologically mature, he said in March. Beijing would rather kids spend more time on sports and studying. But video games have also gained more legitimacy since the early 2000s, as a new form of expression, art and, perhaps most importantly to authorities, business. How does China restrict video games? The Chinese government has imposed various restrictions on the industry for years, and they are known as some of the harshest in the world. Middle-aged Honour of Kings player baffles Tencent The latest restrictions, announced at the end of August , limit gamers under the age of 18 to playing only between the hours of 8pm and 9pm on Fridays, Saturdays, Sundays and statutory holidays. This change was an update to a 2019 rule that limited minors to 90 hours of gameplay per day and three hours on holidays. The 2019 regulations also introduced spending limits for children, which have remained unchanged. Players between the ages of 8 and 16 can spend up to 200 yuan per month in a game and those between 16 and 18 years old can spend up to 400 yuan. Beijing sought to curb video game use as early as 2000, when it banned gaming consoles . However, the ban was only ever loosely enforced and a grey market for imported games and consoles has flourished for years. One restriction that remains in full effect is on content. Beijing has strict censorship rules on all forms of media, and video games receive some of the strictest scrutiny. Among the things that have been banned in video games are crimson blood, ghosts, skeletons, and too much skin and cleavage. Tencent Holdings famously could not even monetise its own PUBG Mobile game in China, until it was rebranded and reskinned as Peacekeeper Elite , a patriotic game where players take part in a military exercise and disappear when defeated instead of keeling over on the battlefield. The approval process has also been used to slow down or temporarily halt the roll-out of new games. There was a nine-month freeze on new video game licences in 2018, and another suspension of game approvals this year with signs that it would end after four months . Is China influencing video game culture? Despite routine video game crackdowns, Chinese authorities have signalled that they realise the potential of the medium to promote the country’s Chinese culture and contribute to economic growth. This level of economic clout in the industry comes with influence, for both game developers and the Chinese government. Early efforts at producing propaganda through the medium became known as “red online games”, which were titles that promoted Communist Party history and patriotism, such a series called Resist Japan Online that focuses on fighting Japanese occupation during World War II. These games had little success compared with the much more popular historical drama genre. Games based on Chinese literature like Journey to the West or Romance of the Three Kingdoms have been incredibly popular. However, as recently as 2019, some Chinese gamers had been lamenting that there weren‘t any domestic Three Kingdoms games as good as Total War: Three Kingdoms or other foreign-developed games. Romance of the Three Kingdoms: Strategy Edition , from Alibaba Group Holding, owner of the South China Morning Post , has since found success . Video game industry revenue in China, 2008 to 2020 Year Revenue (billions of yuan) 2008 18.56 2009 26.28 2010 33.3 2011 44.61 2012 60.28 2013 83.17 2014 114.48 2015 140.7 2016 165.57 2017 203.61 2018 214.44 2019 230.88 2020 278.69 Source: Game Publishing Committee of the China Audio-video and Digital Publishing Association China is now the world’s largest video games market, with revenues reaching 278.7 billion yuan (US$43 billion) in 2020 , when gaming became an important form of entertainment during the Covid-19 pandemic. Industry growth in China has largely been aided by the rise of smartphones and mobile gaming. Companies like Tencent and NetEase have become some of the best mobile game developers in the world, making many hit games based on foreign intellectual property. NetEase’s Harry Potter: Magic Awakened has recently become a huge, lucrative hit, pulling in US$22.7 million in its first week in September and sending the Chinese developer’s shares soaring throughout October. As these companies have grown, they have also sought stakes in other gaming companies, both large and small. Tencent has been very aggressive in this approach, taking stakes in everything from the smallest start-ups to gaming giant Activision Blizzard. It took a 49 per cent stake in Fortnite developer Epic Games and acquired League of Legends developer Riot Games. This has helped make Tencent the largest video games company in the world by revenue. Some of China’s biggest video games are still based on overseas properties. Honour of Kings , the most lucrative video game in the world, was famously influenced by the popularity of League of Legends . Honour of Kings , however, draws from Chinese mythology and legends, and the overseas version titled Arena of Valor has found limited success. Tencent’s biggest hit overseas is PUBG Mobile , and that remains another big revenue generator. It has also seen increasing success with Call of Duty: Mobile . More recently, Genshin Impact has shown how China’s gaming industry is starting to come into its own. The cross-platform game had the biggest global launch ever for a Chinese game. Elon Musk tweets he ‘can’t wait’ to be in Genshin Impact As China’s gaming industry has come under the global spotlight, more controversies have arisen over censorship. Following the release of the hit Taiwanese horror game Devotion , some eagle-eyed players discovered a poster linking Chinese President Xi Jinping to Winnie the Pooh – a comparison that resulted in many instances of the cartoon character being banned in 2017. The game was subsequently pulled from Steam and developer Red Candle Games apologised. There have also been cases of censorship of in-game chat. One such incident led mainland developer Seasun Games to cut ties with its Taiwanese partner when it refused to censor chats. Chat censorship also briefly became an issue last year with Genshin Impact . American studios have also felt the pressure to stay on Beijing’s good side. Blizzard Entertainment became the subject of controversy when it punished a Hearthstone player for shouting out a slogan in support of Hong Kong protesters after winning a tournament game in 2019. No regrets, says esports player banned for Hong Kong protest slogan Blizzard said the decision was not influenced by ties with China , and later reversed the punishment that would have withheld the US$10,000 in winnings from the player. However, it sparked widespread concern among gamers in the US over censorship, some of whom protested at Blizzard’s annual gaming event BlizzCon . Will the crackdown affect China’s esports ambitions? With the introduction of new time limits for minors this year, some industry watchers began to wonder about the long-term impact it might have on China’s burgeoning esports industry . Esports have become a point of national pride in China, where many teams have become internationally competitive in games like Dota 2 , Honour of Kings and League of Legends . The League of Legends Championship was even held in Shanghai last year and was supposed be held there again this year until Covid-19 travel restrictions scuttled that plan. Chinese authorities have still not publicly discussed how they plan to address this issue, but experts say there are ways to work around the restrictions rather than let the industry wither. There could be exceptions carved out for certain players training for tournaments, for example, or for school esports programmes. In a sign of good news for the country’s esports enthusiasts, the League of Legends World Championship was covered by state media when the Chinese team Edward Gaming unexpectedly won the Summoner’s Cup trophy this year. Also, while the time restrictions apply to all types of video games, not all games are created equal in the eyes of authorities. Two super genres of games have emerged in China based in part on government preferences: danji and wangluo . Danji means single device, but the term is used for any game that does not need an internet connection (these titles can still be played with other people online). Wangluo means internet games, or those that require a server to be played such as massively multiplayer online role-playing games like World of Warcraft . The main difference where the government is concerned is that wangluo games are considered addictive while danji games are considered athletic, according to Szablewicz, a distinction that aligns with China’s esports ambitions but that does not appear as relevant in the mobile age. The Chinese government officially labelled dianzi jingji , or esports, as the country’s 99th professional competitive sport in 2003.