SINGAPORE (BLOOMBERG, REUTERS) - Chinese state media, including the Communist Party's flagship newspaper, toned down their criticisms of the video-game industry on Wednesday (Aug 4) after a harshly worded piece had a day earlier triggered a plunge in shares of Tencent Holdings and other companies in the sector.
Instead of calling video games "spiritual opium," as a Tuesday article in the Economic Information Daily had, the People's Daily published an editorial in its overseas edition that stressed the need for government, schools, families and broader society to work together to better protect children from excessive gaming. Because the People's Daily is controlled by the Communist Party's Central Committee, its positions on issues are widely seen as reflecting the views of China's most senior leaders.
While the People's Daily editorial used softer rhetoric, it nonetheless highlighted the potential adverse effects gaming can have on children, as did other outlets such as the Securities Daily and the China News Service. That criticism suggests greater scrutiny of the sector is likely, though perhaps not as severe a crackdown as what Beijing unveiled for the country's after-school tutoring industry last month.
"Even though the wording may seem less harsh today than it was yesterday, that doesn't change the fundamental theme of late - making Internet giants give up some of their profits and to give more spending power to the people," said Fang Rui, managing director at Shanghai WuSheng Investment Management Partnership. But regulations will vary by industry and those for the gaming sector "won't be as brutal as those toward education," Mr Fang said.
Shares of Tencent, China's largest social media and video game firm, was trading 4.89 per cent higher in Hong Kong at the midday break after having fallen more than 6 per cent on Tuesday. NetEase was 0.82 per cent lower at the break after having been down as much as 6.03 per cent in morning trading.
Among other media that chimed in on the issue on Wednesday, the Securities Daily said on its front page that pushing for healthy development of the industry was a pressing matter and called preventing video-game addiction among minors "the bottom line." The China News Service said late on Tuesday that it was "immoral" to blame schools, companies or parents alone for children spending long hours playing video games.
Even the Economic Information Daily took steps to soften its wording. The newspaper's commentary that sparked Tuesday's sell-off was removed from its website Tuesday afternoon, only to reappear hours later with the terms "spiritual opium" and "electronic drugs" removed from the article.
Shares of European and United States gaming companies also took a hit on Tuesday.
Activision Blizzard, which has the largest exposure to Chinese markets among its US peers and was due to report after the closing bell, was down 3.8 per cent.
Electronic Arts, the company behind Sims, was down 2.8 per cent. Take-Two Interactive Software, which gave an annual forecast late on Monday that disappointed investors, was down 7.6 per cent.
Shares of Amsterdam-listed Prosus, which holds a 29 per cent stake in Tencent, fell 6.9 per cent, while European online video gaming stocks Ubisoft and Embracer Group fell about 5 per cent and 3.7 per cent, respectively.
In the original article, the newspaper had singled out Honour 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 is a sensitive subject in China, which ceded Hong Kong island to Britain "in perpetuity" in 1842 at the end of the First Opium War, fought over Britain's export of the drug to China where addiction became widespread.
Tencent in a statement on Tuesday said it will introduce more measures to reduce minors' time and money spent on games, starting with Honour 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.
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.
