Tencent and other Asian video game companies have taken a sudden dive in their stocks. The reason for this comes from investor speculation flaring up over statements from China's official news agency.
What caused Tencent's stock to plummet?
Early on Tuesday at the ChinaJoy expo, the Propaganda Department of China's Communist Party said that video games needed to be "good, clean, and secure." This initial statement caused stocks to plummet for Tencent and other Asian video game companies as investors worried that China may be thinking about tighter restrictions on the industry. Tencent initially lost 11% of its stock value, but it later rebounded up to a loss of only 6%, resulting in a loss of about $110 billion since the start of last week.
Shortly after the first statement, the Xinhua News Agency, which is the country's official state-run press agency, published an article heavily criticizing the country's video games industry. In particular, it singled out Tencent by saying that its most popular game, Honor of Kings (or Arena of Valor as it's known internationally) is played by students over eight hours a day. The original publication of the article said,"'Spiritual opium' has grown into an industry worth hundreds of billions". Being the state's official press agency, what their articles say is often interpreted as the state's official views, but that original article may have been more scathing than they actually meant. The article was briefly taken down before being published again with edits that made it less scathing, including the removal of the loaded reference to opium.
Tencent, in response to the article, released a statement promising to further limit gaming time for minors and considered banning players under 12 years old. Other than what Tencent has done, no changes have yet arrived in the Chinese video game market, which previously had banned consoled between 2000 and 2015.
However, it's still gotten investors speculating over the possibility of tighter restrictions or a full-blown crackdown that could spell the end of an industry. Plenty of companies, such as Apple and Activision Blizzard, get a good share of their profits from China, so drastic changes to their video game industry could have severe effects on their income. That said, the removal of the original comparison hints we're more likely to see pressure to introduce systems like Tencent's or other restrictions rather than a banning or more stringent measures.