China ended its eight-month freeze on new video game licences on Monday, bringing hope to an industry that has been assailed for inappropriate content and for encouraging addiction among players. But analysts have warned that those hoping for a return to the days when around 100 new games were approved every month will likely be disappointed amid a tough new regulatory environment. For a start, none of the newly-approved batch of 45 games by the National Press and Publication Administration (NPPA) belong to Tencent Holdings or NetEase – the country’s two biggest video games producers. Most of the titles belong to relatively small gaming developers, including Baidu, XD.com, Lilith Games and 37Games. And the list of new games is significantly shorter than it used to be. There were 87 titles approved when the last list was published on July 22, 2021. In the first seven months of 2021 – prior to suspension – the regulator approved 679 titles, or 97 per month. So despite the huge backlog since July 22, the regulator has not shown any sign that it is about to open the floodgates. China resumes video game licensing after 8-month freeze You Haokun, a senior analyst at research firm LeadLeo, said the small size of new approvals and the absence of big gaming houses shows that Beijing remains cautious about greenlighting new video games for the world’s largest gaming market. However, he still expects game approvals to climb in coming months. Chenyu Cui, a senior analyst at Omedia, said the latest approvals list is far from a sign of regulatory goodwill and there are still many uncertainties ahead. For example, “it’s not known when the next batch will be approved,” said Cui. China’s strict new licensing system for gaming stemmed from a re-evaluation by authorities about the extent to which modern video games can influence a person’s mindset and views. As such, all online video games that reach Chinese players must be screened and censored by the state in the same way that it scrutinises books, films and television programmes. In a regulatory reshuffle in 2018, the power of licensing new games was centralised within the NPPA, an agency that sits under the supervision of the Central Propaganda Department of the Chinese Communist Party. Since then, the approvals flow for new games thinned dramatically with only 162 titles approved in January 2019 after an initial nine-month suspension compared with 721 titles before the freeze. As with other sensitive ideological areas, China’s gaming censors have been particularly vigilant when it comes to keeping foreign games at bay, with all imported titles censored and localised. Roblox’s Chinese version, LuoBuLeSi, which is published and operated by Tencent, closed its server last December, while the global version of popular gaming platform Steam became unavailable on the mainland the same month. Steam is operated by Bellevue, Washington-based Valve Corporation. Aside from content, pressure on the industry was amplified last year after President Xi Jinping said gaming addiction among the country’s youth had become a social problem that must be fixed. “Anti-addiction” functions became a new requirement for the industry, forcing video game developers to use facial recognition, artificial intelligence and special verification systems to make sure that players of their games were not aged under 18. In addition, under 18 players in the country were restricted to playing only between 8pm and 9pm on Fridays, Saturdays, Sundays and statutory holidays – turning China into an unfriendly place for young gamers. Kuaishou aims to break even in 2022 but China is tightening control Censors have urged the country’s gaming studios to produce content that reflects positive social values and to avoid excessive violence. The harsh regulatory framework contributed to a sharp drop in revenue growth in China’s video games market in 2021, according to data from the Game Publishing Committee (GPC) of the China Audio-Video and Digital Publishing Association, China’s state-backed gaming industry association. The industry’s gross sales revenue grew at a meagre rate of 6.4 per cent in 2021, down from growth of 20.7 per cent in 2020. Meanwhile, the number of gamers in China rose by just 0.22 per cent to 66.6 million gamers in 2021, compared with growth of 3.7 per cent in 2020, according to the same report. The harsh new environment has seen the collapse of at least 14,000 gaming companies and pushed the industry to look for new growth in overseas markets. However, despite the gloom, the resumption of licensing approvals has cheered some. China’s latest freeze on new video game licences may surpass previous record delay “[I’m] weeping with joy,” said Huang Yimeng, chief executive of XD.com, one of the companies which received a licence for its title Flash Party , launched in Japan in 2017 but waiting for approval in China since early last year. Some analysts are also more sanguine. Daniel Ahmad, an analyst at Niko Partners, said in a research note that the resumption of new licenses showed regulatory concerns over “non-compliance” had been addressed. “Over 5,000 game companies have now connected to the national anti-addiction system, and non-compliant companies have been investigated and fined by the relevant regulators,” wrote Ahmad. Zhang Yi, chief executive of iiMedia Research, said the resumption of approvals indicated Beijing wants the gaming industry to play a role in supporting the economy. “The role of the gaming and digital entertainment industry in boosting consumption and economic recovery, and the development of the entire market, should be taken into account,” said Zhang.