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Tencent's online gaming issues in China have gotten worse



  What You Should Know About Tencent

China is crunching online games, making Tencent's worries even worse.

Chinese top Internet company shares plummeted more than 5% on Friday morning trading in Hong Kong after Beijing announced it was limiting the number of new online games and limiting the amount of time children play on electronic devices.

Tencent ( TCEHY ) is the largest gambling company in the world with a large portion of its business in China, a market where there were already other problems caused by regulators , The stock has plummeted nearly 30% since January, wiping out more than $ 1

60 billion in market value.

The Chinese authorities will "monitor the number of new online games, investigate an age-appropriate reminder system in line with national conditions, and take action to limit the lives of minors," the Ministry of Education announced in a statement on Thursday. He said the measures were part of a government action to reduce nearsightedness in children and adolescents.

Tencent is already suffering from the increasing regulation of the gaming industry. The company reported a rapid decline in profits earlier this month and was largely responsible for the decline as regulators did not approve licenses that would allow companies to make money from new mobile games.

During a payday bid, Tencent President Martin Lau assured investors that the restrictions were temporary. However, the recent announcement by the government reinforces concerns about an increasingly restrictive environment for technology companies in China.

  Tencent Gaming Arena of Bravery
China is the largest gambling market in the world.

Tencent has still not received Chinese authorities' approval to make money from some of its most popular mobile games, such as PlayerUnknowns Battlegrounds. The authorities also blocked a game called Monster Hunter: World, which was expected to sell well. Another game, "Honor of the Kings," was intensively investigated last year for allegedly causing addiction among young people.

Tencent and Netease ( NTES ) Another big game developer, should be more resistant to the new restrictions than smaller companies, according to Karen Chan, a Analyst at investment bank Jefferies. Industry heavyweights have already put in place control systems to regulate how much time children spend playing their games, she said in a letter to investors.

But Chan acknowledged that the impact of the new measures on Tencent and others will only become apparent as more details become available. The question remains as to how the number of new games will be limited, how it will be implemented and whether it will further delay the approval process, she said.

The ministry's announcement also targeted parents and educators, saying they should reduce the time children spend on smartphones and tablets, and encourage children to play and train at least one hour per day.

According to market research firm Newzoo, China is the world's largest gambling market, accounting for a quarter of global sales. The company predicts that China's total game revenue in 2018 will reach $ 38 billion.

– Catherine Wang contributed to this report.

CNNMoney (Hong Kong) First published August 30, 2018: 11:59 PM ET


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