Xi Jinping just can’t help himself.
On Friday, Chinese regulators blindsided markets with a raft of new restrictions aimed at curbing practices conducive to what authorities have in the past described as a socially deleterious gaming addiction.
Among other things, the draft rules establish limits on in-game spending and appear to prohibit some incentives designed to facilitate engagement. The unexpected regulatory broadside conjured uncomfortable memories of Xi’s draconian 2021 crackdown, which decimated Chinese tech. That effort began as an antimonopoly sweep but morphed into something much bigger.
Tencent suffered a veritable wipeout on Friday in Hong Kong. The shares plunged 16% at the worst levels. That counted as the single-biggest one-day decline since the financial crisis.
The market cap loss was nearly $50 billion. NetEase shed nearly a third of its value at the lows.
Now, as in 2021, markets and Chinese tech companies are left to wonder what’s next. Will the Party halt game approvals again? Or take even more direct steps to limit gaming companies’ earnings power? What happens if Xi decides no more games at all? He’s not a man who happily countenances activities believed to constitute a threat to China’s well-being, after all. The Party’s disdain for online gaming is famous.
Media outlets described furious developers and bewildered traders. Investors expressed dismay at the timing. The Party unveiled the restrictions into a thin market ahead of a four-day weekend for Hong Kong. If you didn’t know any better, you’d think Xi intended to trigger a rout.
The Hang Seng Tech index dropped nearly 5%, the largest single-session selloff since February and among the biggest one-day losses of the year.
Crucially, the rules suggest the Party remains far more concerned with implementing Xi’s social agenda than with reestablishing trust with markets and the private sector. Simply put: Investors thought this was over. Plainly, it isn’t. And it’s obvious the Party’s still inclined to what looks like capricious spite.
To be sure, I generally agree that online gaming is a scourge, and that it’d be better if young people the world over eschewed the virtual sphere altogether. But the overnight imposition of normative decrees with unknowable ramifications for giant enterprises like Tencent which are embedded in global portfolios through popular emerging market equity ETFs seems wildly mercurial — until you consider the source, then it makes perfect sense.
Ultimately, Beijing succeeded in delivering yet another body blow to market confidence at the tail-end of a very bad year. Call it a coup de grâce.
“But the overnight imposition of normative decrees with unknowable ramifications for giant enterprises like Tencent which are embedded in global portfolios through popular emerging market equity ETFs seems wildly mercurial — until you consider the source, then it makes perfect sense.”
The best writer on the interwebs, folks.
I do what I can. Merry Christmas.
I’m with Edward. That was one well crafted sentence. I’m always ready to raise a glass (non-alcoholic in consideration of present company) for a good spot of word smithery.
Oh, and Merry Christmas to you too, one atheist to another!
I’m a middle aged, avid online gamer. I’d argue an overwhelming amount of ‘screen time’ is a scourge, but online competitive gaming is very cerebral, stimulating, and can be very collaborative — in Korea its comparable to our NFL. I wouldn’t be surprised if its popularity picks up as the boomers leave our mortal coil — sorry boomers. Happy Holidays.
Hey, I resemble that remark!
Ditto. This post contains a fair slice of OldManShoutsAtCloud.gif
Screen time is demonstrably deleterious to childhood development, but gaming can be great.
I think my age would surprise some of you folks. But… well, that’s part of the intrigue.
I’m pretty confident your age is +/- 5 years of my own (if forced to be specific, I’d say +3) I’m a bicentennial baby.
45ish
60ish.
Think back to ancient Rome. Keeping the masses under control via spectacles at the Coliseum. Today in the USA, we have video/online gaming and the ever-expanding sports betting options, along with opiods, which help distract people from their hopeless economic precarity.
So the US will never limit either.
Shocking…absolutely shocking…not by Xi’s actions (Taiwan, Taiwan, here we come), but the realization that (Wave Dash) other “generations” consider themselves to be “middle aged”.
Oh well. I hope you all , especially Walt, have a Merry Christmas and a Happy New Year.