China to import 44 foreign video games, grants multiple licences to Tencent

© Reuters. FILE PHOTO: Pokemon games are seen on sale in a GameStop in Manhattan, New York, U.S., December 7, 2021. REUTERS/Andrew Kelly

By Josh Ye

HONG KONG (Reuters) -China's video game regulator granted publishing licences to 44 foreign games for domestic release，including seven from South Korea, further lifting rigid curbs that have hammered the industry for 18 months.

South Korean gaming stocks, including Netmarble Corp, NCSOFT, Krafton, Kakao Games and Devsisters jumped between 2% and more than 17% in morning trade on Thursday, a day after Chinese authorities granted publishing licenses.

The approval of seven South Korean games is significant because China has restricted the import of South Korean content since a 2017 dispute over South Korea's installation of a U.S. missile defence shield. Before this new list, only two South Korean games had been approved.

Among the imported online games approved by the National Press and Publication Administration are five to be published by Tencent Holdings (OTC:TCEHY) such as "Pokémon Unite" by Nintendo and "Valorant" by Riot Games, according to a list the regulator released.

The regulator initially released a list of 45 approved imported games. It removed Yoozoo's "Game of Thrones: Winter is Coming" later on Wednesday, without giving a reason. Yoozoo appears, however, to already have a license, according to a document the authority published in September.

Yoozoo did not immediately respond to a request for comment.

The regulator also approved 84 domestic games for the month of December, according to a separate list released on Wednesday.

The approval of imported games effectively marks the end of China's crackdown on the video game industry which began in August last year when regulators suspended the game approval process.

Regulators resumed issuing game licenses to homegrown games in April, and the approval of foreign games was seen as the last regulatory curb to be removed.

Unlike in most other countries, video games need approval from regulators before release in China, the world's largest gaming market.

The year-long crackdown on the industry has dealt a significant blow to Chinese tech companies including Tencent and NetEase (NASDAQ:NTES) Inc which derive substantial revenue from publishing both self-developed and imported games.

Through various affiliated companies, Tencent, the world's largest gaming company, has effectively received a total of six licences in December, a source with knowledge of the matter told Reuters.

Tencent only received its first commercial game licence in over a year-and-a-half last month, which was seen then as an important signal towards policy normalisation for the industry.

Other imported games approved include CD Projekt's "Gwent: The Witcher Card Game" and Klei Entertainment's "Don't Starve".

Besides Tencent, NetEase, ByteDance, XD Inc and iDreamSky have also received game approvals in December.

Shares of Tencent, XD Inc, iDreamSky rose between 0.8% and 5.2% in Hong Kong, while Japan's Nintendo gained 0.2%.

The number of licences granted are fewer than in previous years. China approved 76 imported games in 2021 and 456 in 2017.

In a year-end meeting this month, Pony Ma, founder of Tencent, said that the company had to get used to Beijing’s strict licensing regime, and the number of new games that China approves would remain limited in the long run.