For Tencent, Game Over?

The big story in China’s tech sector this week was Beijing’s renewed clampdown on online games, which sent shares of Internet giant Tencent Holdings into a tailspin.

On Thursday, a report from China’s Ministry of Education blamed the proliferation of mobile phones and other gadgets for a surge in near-sightedness among the nation’s youth. The ministry called for sweeping restrictions on online games, including a new system for age ratings and strict limits on the amount of online playtime for minors. Shares of Tencent, the world’s biggest online game distributor, sank more than 5% in Friday trading.

Beijing has been ratcheting up pressure on Tencent and other online gaming companies all year. Regulators haven’t approved the sale of any new games or in-game apps since March. In early August, they forced Tencent to pull “Monster Hunter: World,” a game that allows players to pose as hunters stalking fantasy creatures in exotic lands. “Monster Hunter” was developed by Japan’s Capcom and distributed on Tencent’s WeGame platform. Regulators, apparently, considered it too violent.

Days later, Tencent stunned investors with an announcement that it had missed its quarterly earnings targets and posted a drop in profit growth for the first time in more than a decade. Tencent president Martin Lau attributed the company’s lackluster performance to bureaucratic reshuffling within the government, which he said had slowed approval of licenses needed to sell in-game apps.

But it’s increasingly clear Tencent’s troubles are part of a broader effort to impose discipline on Chinese Internet firms. Under orders from president Xi Jinping, China has tightened censorship, banned virtual private networks, decried the sale of counterfeit goods online. New York Timescorrespondent Raymond Zhong points out that China’s state-owed Xinhua news service reportedthis week that Xi felt moved to address the near-sightedness problem after reading about it in the press—suggesting China’s “core leader” himself is behind the anti-gaming crusade.

As the father of a 12-year old boy, I like the sound of this new policy—though I fear the empirical evidence offered in support of it seems a little fishy. I can think of another possible culprit for near-sightedness: homework, which Chinese kids do loads more of than their American counterparts. Whatever the justification, the gaming crackdown is taking a heavy toll on one of China’s largest and most innovative tech players. Tencent’s share price has plunged more than a third since its high in January, wiping out more than $160 billion in market capitalization.

source:-fortune.