China Bets on Homegrown Games

At the end of 2022, the Chinese government approved 44 imported video games adapted to the domestic market, ending a nearly 18-month import ban. The list included Pokémon Unite and Valorant, although the former wasn't published by Nintendo, but by media company Tencent. According to the strict regulations of the Chinese games market, every title requires a publisher based in the country. As our chart shows, few international games received an official release in the People's Republic over the past five years.

In 2018, for example, just under 2,000 domestic games were approved, while only 50 games from countries such as South Korea, Japan or the US received a release permit. Although around 2,000 games released per year sounds like a lot, the total number of game releases on Steam, the largest online store for PC games, illustrates China's rigorous approval policy. According to data from SteamDB, about 9,000 titles were published on the platform in 2018, compared to about 11,500 and 13,000 in 2021 and 2022, respectively.

The low numbers of domestically published games in the past two years can be explained by the country further tightening its media policy. In August 2021, the National Press and Publication Administration introduced additional restrictions on the consumption of games by minors. Since September 2021, children and young people have only been allowed to play online games for one hour per day on weekends, and a general ban applies during the week. Accompanying this realignment was a complete suspension of the approval process for imported and domestic games. The ban on the latter lasted until April 2022.

Chinese gamers have already circumvented the ban on the international version of Steam in the past by using VPNs, so a similar use during the time of the approval pause is likely. There are no reliable figures on the extent of these activities deemed illegal in the People's Republic apart from individual statistics published by game developers.

The licensing halt also had an impact on Tencent's financial results: Compared to the same period last year, net profits in the first quarter of 2022 in the value-added service (VAS) segment, which includes social media and other digital content in addition to games, fell by about $800 million. Since Tencent doesn't cite more specific subcategories in its financial reports, it's unclear how much the losses in the online games segment ultimately amounted to. The company's video game revenue in the first quarter of 2022 was $6.5 billion, according to the company.