Nation Opens Door Wider to Foreign Games Companies

[XING WEI/FOR CHINA DAILY]

Supportive regulatory policies offer better environment

Foreign companies are seeking opportunities in the world's biggest video games market as China implements supportive regulatory policies and provides a better environment for global stakeholders, analysts said.

The nation granted licenses to 27 foreign online games in March, including titles to be published by China's leading technology and internet companies such as Tencent Holdings, NetEase and Bilibili.

It was the second group of foreign online games to receive publishing licenses since December, when the National Press and Publication Administration approved the first group of 44 foreign games for last year.

Analysts said the latest move marks a break with the past, as the NPPA usually grants licenses to foreign games in the second half of the year, especially in November and December.

In contrast with moves by the United States to crack down on Chinese technology products and apps such as TikTok, the analysts said China is committed to opening its doors wider to the outside world, sending a positive signal for foreign companies seeking opportunities in the ultra-large Chinese market.

Zhang Yi, CEO and chief analyst at iiMediaResearch, said, "Compared with the US' actions to suppress and even blacklist leading companies from other countries, the Chinese government has shown its confidence and tolerance."

The latest move by China to import new video games shows that the country is adhering to the reform and opening-up policies, which are also part of ongoing efforts to deepen reforms, Zhang said.

"As long as the contents of games are appropriate and they are operated legally, China is always open-minded about welcoming foreign companies to develop in its cultural and entertainment market," he said.

"With such a huge market, China welcomes high-quality products from all over the world to serve Chinese consumers. It is beneficial for foreign online games companies to expand their presence overseas and seek business opportunities in China. This will also benefit their Chinese counterparts by increasing market competition, which is conducive to improving the development and management levels of China's games sector."

Zhang said China is sending a positive signal that it will open wider to the outside world, offering huge growth opportunities for stakeholders from around the world.

With China on track for a steady recovery this year, Zhang said the nation will play an increasingly important role in spurring global economic growth, and its huge consumer market will also benefit global companies.

Economy picks up

National Bureau of Statistics data show China's economy is stabilizing. It picked up in the first quarter of this year, mainly driven by a gradual recovery in consumption.

The nation's GDP growth rebounded to a stronger-than-expected 4.5 percent year-on-year in the first quarter after reaching 2.9 percent in the last quarter of 2022.

Retail sales, a key gauge of consumer spending, grew by 10.6 percent year-on-year in March, compared with 3.5 percent growth in the first two months.

In the first quarter, retail sales rose by 5.8 percent compared with the same period last year, while in the final quarter of 2022, they fell by 2.7 percent from a year earlier.

Wu Baokang, an analyst at data intelligence services provider iDigital, said it is highly likely that China will import more batches and games this year than in 2022, given the nation's accelerated approval process for such imports.

"I believe this implies a more supportive regulatory policy toward the games sector, and China will welcome more imported high-quality foreign games," Wu added.

In addition to the nation's accelerated approval for imported games, 347 domestic games were approved in four batches from January to last month, with the monthly number of approvals remaining basically stable at more than 80.

The COVID-19 pandemic sent shockwaves through the global games market. It saw growth in 2020 and 2021, but last year the market witnessed a year-on-year decline of more than 4 percent for the first time since industry consultancy Newzoo started tracking global games market revenues.

Meanwhile, China's games market also shrank for the first time in years in 2022. A recently released industry report said the market generated revenue of 265.88 billion yuan ($38.85 billion), registering a 10.33 percent year-on-year decline amid a complicated and grim domestic and international situation, weakening market confidence and the pandemic.

Released during the China Game Industry Annual Conference in Guangzhou, Guangdong province, in February, the report said some companies had to reduce investment in the research and development of games, with the entire industry entering a stage of financial and business pressure last year.

Analysts said the significant drop in games revenues last year was mainly due to mobile games, which produced revenue of 193.06 billion yuan and comprised more than 70 percent of the Chinese market.

Mobile games revenue in China fell by 14.4 percent year-on-year in 2022, compared with a 7.57 percent gain the previous year, the report said.

China also reported its first fall in the number of games players for nearly a decade, with the figure declining by 0.33 percent year-on-year to 664 million last year. The number of mobile games players stood at 654 million last year, a fall of 0.23 percent year-on-year.

Wu, from iDigital, said that while China's games market experienced a downturn last year due to the sluggish economic situation and weakened desire to buy games during the pandemic, it will likely rebound and see strong growth this year amid the resumption of production and the rapid recovery of consumption.

"There will also be more market opportunities for foreign games companies that develop high-quality products," Wu said.

Overseas ambitions

With the nation encouraging imports of more quality games products, Chinese games developers are expanding their presence overseas, seeking new growth opportunities in emerging markets worldwide.

"Facing fierce competition in the domestic games market, Chinese companies are actively expanding their business abroad," Wu said.

While overseas sales of games produced in China fell by 3.7 percent year-on-year to $17.35 billion last year, sales in the domestic market fell by 13.07 percent year-on-year to 222.38 billion yuan, the industry report said.

Despite being affected by the pandemic in recent years, China has made considerable progress to become the world's most developed mobile market, with Chinese mobile publishers ranked among the best in the world.

China overtook the US for the first time to dominate a list of the top 52 app publishers around the globe. A total of 17 domestic companies earned places on this list, which was released last year by data.ai, a mobile analytics company based in the US.

China's top games and social media operator Tencent and leading Chinese games company Net-Ease retained the top two spots on the list for the fifth consecutive year.

NetEase Games said its products are played in a total of 200 countries and regions, including 140 that have joined the Belt and Road Initiative, or BRI.

The company's Naraka: Bladepoint, a combat game, has become a huge hit in the global market.

Within 30 days of its release, the game was being played in 126 countries and regions involved in the BRI, and as of June, more than 10 million copies of it had been sold globally, NetEase Games said.

It added that income from overseas markets accounted for more than 10 percent of its revenue. The company aims to further expand its overseas business, with 40 percent to 50 percent of its revenue coming from such markets.

Zhang said Chinese games companies have gained a competitive edge in the global market, and their overseas business has become an increasingly important part of their operations.

Despite these notable achievements, Zhang said some Chinese games companies seeking opportunities in global markets still lag behind their international counterparts in areas such as marketing channels and methods.

"They need to operate in a more professional manner in overseas markets, especially in terms of attracting more global talent," he added.

"More efforts should also be made to increase the acquisition of overseas talent and teams. This would be beneficial for local operations and absorb first-class talent from different countries and regions in terms of creative culture, games design and localization channels, among others."