Newspaper article plunges shares of Chinese gaming giants

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Shareholders of Chinese game companies hit a roller coaster on Tuesday after an article in influential state media called online games the “spiritual opium” of teenagers, sending shockwaves through national stock exchanges .

The Economic Information Daily article said that the new type of “drug” has grown into a massive industry, although “no industry can develop at the cost of destroying a generation.” He particularly distinguished the very popular “Honor of Kings”, developed by Tencent Games.

The story was briefly deleted around noon before appearing online again with partial edits – “spiritual opium” was replaced with “online games” instead. But the damage was already done.

Shares of major games companies listed on Chinese exchanges – including Tencent Holdings, NetEase, China Mobile Games and Entertainment Group, and XD Inc. – fell 10% to 20% before rebounding after the article was deleted. Tencent’s market value lost nearly $ 64.3 billion at one point.

As the official publication of the China Securities Regulatory Commission, Economic Information Daily generally presents the positions of the government body on various issues.

“As an industry player, I welcome media oversight. But the phrase “spiritual opium” has had a significant negative impact and is very insulting, “Huang Yimeng, CEO of XD Inc., wrote on the Zhihu question-and-answer site.

Chinese game companies have often been criticized for increasing gambling addiction among minors, with authorities introducing measures such as nighttime curfews to limit playing hours. Meanwhile, major players like Tencent Games have also introduced features – including facial recognition technology – to prevent children and teens from spending too much time online.

Tuesday’s article sparked heated discussions on Chinese stock forums such as Xueqiu and Futubull, with shareholders weighing on their stock positions.

” I am going to sell. If I keep you today, I will regret it in the future, “wrote a user on Futubull.

“If the gaming industry goes bankrupt and capital flows elsewhere, it will not only affect Tencent shareholders, but everyone who buys shares. It hurts long-term investor confidence, ”wrote one user on Xueqiu.

Tencent did not directly respond to the Economic Information Daily article, but posted new metrics targeting gambling addiction on its corporate blog through the WeChat social app. The measures include reducing playing time for minors from 1.5 hours to one hour per day, and holidays from three hours to two hours.

The company declined to comment on the story.

In recent months, authorities have launched a series of regulatory measures on the tech and education sectors, causing stock prices to plummet.

Wang Qi, CEO of Hong Kong-based MegaTrust Investment, told CNBC last month that the Chinese government has no plans to shut down big tech companies, adding that current events are “regulatory standardization. Internet in China “. He added that the country’s online space was largely unregulated until the revised cybersecurity law came into effect in 2017.

“China is still very determined to develop its domestic technology sector,” Wang said.

However, investors are worried.

Vivian Gao, a shareholder in publicly traded Chinese education company Youdao Inc., said she had lost $ 2,500 since Beijing’s brutal response to tame tutoring schools.

“Previously I thought I could just focus on business performance, but now I think relevant policies shouldn’t be overlooked either,” she told Sixth Tone. “I did not buy the shares of Tencent, but I am still worried. Which company will be next?

Publisher: Bibek Bhandari.

(Header image: visual of people)

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