Tencent vows fresh gaming curbs after ‘spiritual opium’ attack zaps $60 billion

China’s Tencent Holdings Ltd said on Tuesday it would further curb minors’ access to its flagship video game, hours after its shares were battered by a state media article that described online games as “spiritual opium”.

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Economic Information Daily cited Tencent’s “Honor of Kings” in an article in which it said minors were addicted to online games and called for more curbs on the industry. The outlet is affiliated with China’s biggest state run news agency, Xinhua.

The broadside re-ignited investor fears about state intervention in China after Beijing had already targeted the property, education and technology sectors to curb cost pressures and reassert the primacy of socialism after years of runaway market growth.

“They don’t believe anything is off limit and will react, sometimes overreact, to anything on state media that fits the tech crackdown narrative,” Ether Yin, partner at Trivium, a Beijing-based consultancy.

China’s largest social media and video game firm saw its stock tumble more than 10 percent in early trade, wiping almost $60 billion from its market capitalization. The stock was on track to fall the most in a decade before trimming losses after the article vanished from the outlet’s website and WeChat account.

The CSI300 index last week fell more than 5 percent for its biggest monthly loss since October 2018.

In the article, the newspaper singled out “Honor of Kings” as the most popular online game among students who, it said, played for up to eight hours a day.

“‘Spiritual opium’ has grown into an industry worth hundreds of billions,” the newspaper said.

“....No industry, no sport, can be allowed to develop in a way that will destroy a generation.”

Opium became a sensitive subject in China after it ceded Hong Kong island to Britain “in perpetuity” in 1842 at the end of the First Opium War, fought over the export of the drug to China where addiction became widespread.

Tencent in a statement said it will introduce more measures to reduce minors’ time and money spent on games, starting with “Honor of Kings”. It also called for an industry ban on gaming for children under 12 years old.

The company did not address the article in its statement, nor did it respond to a Reuters request for comment.

The article also hit rivals’ shares. NetEase Inc dropped more than 15 percent before paring losses to sit around 8 percent lower in late afternoon trade. Game developer XD Inc fell 8.2 percent and mobile gaming company GMGE Technology Group Ltd dropped 15.6 percent.

Outside of gaming, investors were also caught off guard by the State Administration For Market Regulation (SAMR) on Tuesday saying it would investigate auto chip distributors and punish any hoarding, collusion and price-gouging. The semiconductor stock index subsequently fell more than 6 percent.

Staff members stand at the booth of Honor of Kings, a Tencent Games game, during the World Artificial Intelligence Conference (WAIC) in Shanghai, China July 8, 2021. (Reuters)

Child wellbeing

A separate opinion piece published by the China News Service on its official Twitter-like Weibo account hours after the Economic Information Daily article took a different tone, saying that blame could not be placed on any one party, including game developers, for child addiction to online video games.

“Schools, game developers, parents, and other parties need to work together,” said the news outlet, which is also state-run.

Chinese regulators have since 2017 sought to limit the amount of time minors spend playing video games and companies including Tencent already have anti-addiction systems that they say cap young users’ game time.

But authorities have in recent months placed fresh focus on protecting child wellbeing, and said they want to further strengthen rules around online gaming and education. Last month, they banned for-profit tutoring in core school subjects, attacking China’s $120 billion private tutoring sector.

That added to other regulatory action in the technology industry, including a ban on Tencent from exclusive music copyright agreements and a fine for unfair market practices.

At one point on Tuesday, Tencent was briefly de-throned as Asia’s most-valuable firm by market capitalization by chipmaker Taiwan Semiconductor Manufacturing Co Ltd.

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