Tencent and Chinese Tech Stocks Unmoved by Possible Ease on Gaming Restrictions

In an unexpected move, Beijing has dismissed a key figure in charge of China's videogame industry supervision, as reported by multiple news outlets. This action hints at an attempt by the government to mitigate the negative repercussions from stringent regulations that incited a significant market downturn affecting major tech corporations, evaporating around $80 billion in market value.

Dismissal at the Top

Feng Shixin, who previously held a leading role in the Publicity Department's publishing unit and had oversight of the gaming regulatory body, was removed from his position. This decision follows the abrupt introduction of provisional gaming regulations which spooked investors and prompted a wave of dissatisfaction among those in the sector. Although the National Press and Publication Administration has since dialed back its rhetoric, promising to reevaluate controversial aspects of the proposed rules like the ambiguous limit on player spending within games, investor confidence has been slow to recover.

Market Reactions

Despite these changes, stocks for Tencent Holdings Ltd. and its peers such as NetEase Inc. experienced only a slight recovery and still trade below pre-holiday levels. These companies saw early losses in Hong Kong trading but eventually regained some ground. The move to dismiss Feng seems to signal that the authorities are alert to the need for positive economic sentiment and are concerned about the repercussions of drastic regulatory interventions. Nonetheless, the volatility in policy announcements has left investors wary and uncertain about the sector's direction.

Regulatory Overshadow and Investor Skepticism

The sweeping gaming restrictions introduced were reminiscent of the damaging tech crackdown of 2021, a time when China imposed heavy restrictions across various tech domains, shaking the foundations of prominent firms like Alibaba Group Holding Ltd. and Ant Group Co. The vague nature of the new regulations–encompassing spending caps, reward limitations, and content constraints–has amplified investor uncertainty and skepticism despite some optimism over policy stabilization.

In the backdrop of these events, Tencent had managed to get approval for new game releases in December 2022, indicating a potential ease in the two-year gaming crackdown. Still, the market remains cautious, reflecting a broad skepticism about the regulatory landscape's stability.

Tencent, China, Regulation