Tencent Takes Tumble as China Regulatory Body Cracks Down on Gaming

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Tencent (HKG:0700) took a rather sizable hit today, losing approximately $24 billion in Friday trading. This comes after the news of China’s Ministry of Education cracking down on online gaming due to rising levels of myopia (nearsightedness). The publisher of such titles as Monster Hunter: World and PlayerUnknown's Battlegrounds continues to struggle as they scramble to respond and resolve the issue.

In a late notice Thursday, Tencent was told to limit the number of new online games it releases in China and make sure that the youth could have their playtimes restricted, not to mention explore a rating system like the ESRB or PEGI. This would be much different though, as both systems were a result of publishers and developers voluntarily working together prior to legislation being mandated upon the industry.

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The prevalence of nearsightedness in China now is apparently rising fast enough for the government to be able to track the trend, placing the blame mostly on mobile devices and video gaming. Even Xi Jinping has made mention of the quickly rising levels of myopia, calling for all levels of government to assist in the process of treating this issue. More than 450 million suffer from nearsightedness of China’s 1.3 billion people, and Xinping advised that "[a]ll sectors of society should respond to this issue."

Tencent shares fell sharply during the trading day, and since January of this year, they have lost $160 billion in market capitalization. To put things into perspective, this is the approximate market cap of Netflix (NASDAQ:NFLX) at the time of this writing. While it could be said they could very well reign in some of those losses by bringing PUBG and Monster Hunter: World to the Chinese market, with the Ministry of Education taking such issue with the number of games published in a year, this could end up being something they have to unfortunately delay. With two of the most-played games of 2018 (so far) not even being available there, we can only hope that this is merely a delay for our Chinese friends. We will keep you updated on any breaking news in the coming days as Tencent circles their wagons.