Chinese Game Businesses Ready To Bounce Back as Approvals Pick Up

The game market in China appears to be bottoming out. After being temporarily halted, the approval process has resumed, and major players' sales, such as Tencent, have recovered. Nonetheless, regulations remain in place, and businesses are looking for alternative business channels abroad.

"When my son, a second grader, comes home from school, he spends an hour playing Eggy Party on my smartphone," said a woman in her 40s in the Guangdong province city of Guangzhou. "It suddenly became popular in his class after the new school year started in February."

Eggy Party was launched by gaming giant NetEase in May 2022. The game, in which players control an egg-shaped character and try to reach a goal while overcoming obstacles, is now one of the company's largest games: An average of over 30 million people play it every day.

NetEase's game-related business sales increased by 8% year on year in the January-March period, reaching 20 billion yuan ($2.8 billion). "2023 is off to a good start," CEO William Ding stated. "New games like Eggy Party have broadened the user base."

Tencent, the industry's largest player, also performed well in the first quarter, with game sales increasing 11% to 48.3 billion yuan. For the first time in five quarters, sales in China, which account for roughly 70% of total sales, increased. Honour of Kings and other mainstays performed well, with some new productions also

"If the current pace continues, the number of approved games for the full year of 2023 will exceed 1,000," said Great Wall Securities in China. "This will make it easier for production companies to launch games and stabilize the industry."

However, regulations remain in place. Since September 2021, the Chinese government has limited the use of online games by minors to the hours of 8 to 9 p.m. on weekends and holidays. Furthermore, even though approvals have resumed, the number is much smaller. In 2017, over 9,000 games were approved.

"In the future, we would like to make more than half of our income from games overseas," Tencent Senior Vice President Steven Ma said to Chinese media in May. Currently overseas sales account for about 30% of total sales. NetEase is thought to make about 10% of its sales overseas, but the company's leadership hopes to raise that figure to about 40%.