China Ousts Official Amid Gaming Regulation Backlash, Wiping Billions Off Major Game Stocks

In the wake of contentious gaming regulations that caused havoc in China’s gaming stocks, a principal official has been discharged from the country’s press and publications regulator.

What Happened: Feng Shixin, the head of the publishing unit of the Communist Party’s Publicity Department, was removed from his position. The department oversees the National Press and Publication Administration (NPPA), the regulatory body for China’s vast video game sector, according to a report by Reuters.

The decision to remove Feng was a response to the NPPA’s proposed regulations last month, which led to a significant depreciation in the stocks of the video game industry, including industry giant Tencent Holdings Ltd TCEHY. The NPPA’s proposed regulations, aimed at curbing spending and the use of incentives encouraging video gaming, led to nearly $80 billion being erased from the market value of China’s two largest gaming companies.

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Amidst tightening regulations across various sectors including technology and property, 2022 has been a record-breaking challenging year for the Chinese gaming industry, experiencing a contraction in total revenue for the first time.

Why It Matters: The new gaming regulations, which were introduced in December, were seen as particularly burdensome for smaller developers. According to a UBS analyst, these regulations could lead to a decrease in overall online advertising revenue and were marked as a potential threat to the gaming industry.

The regulations, however, did not remain unchallenged. After a severe slump in the stock values of major players like Tencent and NetEase Inc NTES, Chinese regulators hinted at a possible revision of the proposed regulations. This led to a recovery in the shares of these companies.

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