Tencent and NetEase lose $80 billion due to China's latest move.

According to VGC , the two giants Tencent and NetEase saw nearly $80 billion of their market value wiped out on December 22nd, a move that occurred after Chinese regulators announced new regulations aimed at restricting investments in online games.

Specifically, China's National Press and Publication Administration has released a draft of new regulations that will significantly impact the operations of online game publishers. According to Reuters, the most notable points in this draft include:

• The practice of offering gifts for daily logins, first-time deposits, or consecutive deposits is prohibited.
• There is a limit to the amount of money players can deposit into their game accounts.

Tencent and NetEase see their market value 'evaporate' by $80 billion.

Although the regulations may still be amended and won't officially take effect until next year, this announcement caused the shares of Tencent and NetEase, two giants in the Chinese gaming industry, to plummet. Tencent's stock fell by 16%, while NetEase's stock evaporated by 25%.

Analyst Ivan Su from Morningstar commented: "Removing incentives could lead to a drop in daily player count and in-app revenue, and force publishers to completely change the design and monetization methods of their games."

This isn't the first move by China to tighten control over the gaming industry. In 2021, the government imposed strict time limits on gaming for minors and temporarily halted new game approvals due to concerns about gaming addiction in the country. New game approvals resumed last year, and the latest draft regulations include a provision requiring regulators to process approvals within 60 days.

China's tightening regulations raise serious questions about the future of the online gaming market, which generates enormous revenue for domestic companies. Game publishers will face significant challenges in adapting to the new regulations and finding sustainable monetization strategies amidst restrictions on player incentives and in-app purchases.

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