The gaming industry has developed in leaps and bounds in China. With 668 million players spending an average of 453 yuan each on video games, China boasts the world's most lucrative gaming market. On one hand, rising consumer spending and active investment activities have effectively spurred the development of the game entertainment and home console industries. On the other hand, China's stringent video game regulations since 2019 have forced the industry to adapt significantly, influencing game design, market strategies, and economic outcomes for both domestic and international players.
China’s gaming revenue passed the 300 billion yuan mark in 2023 after a more than triple increase over the last decade. It comes as no surprise that mobile games have become the industry pillar because of their immense popularity. A significant chunk of the new games launched in China were mobile games. In terms of gaming revenue, mobile games ranked first, controlling around 75 percent of market share in 2023. Client games took up the second place with a market share of about 22 percent. Browser-based, home console, and other segments accounted for only 3.4 percent altogether. In terms of genres, casual and role-playing games remained the lead, while dating simulation titles were on the rise.
Foreign gaming companies face significant barriers when entering the Chinese market due to challenging regulations and cultural preferences. China has a rigorous approval process for new games, requiring each title to undergo a thorough review for content that aligns with Chinese cultural values and political sensitivities. Between 2020 and 2023, China approved less than 100 imported games per year. Content deemed inappropriate, such as excessive violence, gambling elements, and politically sensitive material, is censored or modified. Consequently, international games often need to be altered for legal compliance, leading to delayed releases and additional costs. Partnering with local firms is a common practice to ensure games meet regulatory standards.
In this context, local players, specifically Tencent, possess significant advantages in the Chinese gaming sector. With blockbuster titles like Honor of Kings, PUBG Mobile, and League of Legends, Tencent has been holding more than half of the Chinese video game market. In comparison, its imminent domestic rival NetEase occupied a market share of about 17 percent, with well-known games like Identity V, Onmyoji, and Harry Potter: Magic Awakened. Other relatively new entrants like miHoYo, 37 Interactive Entertainment, and Perfect World have gained a toehold in the gaming market.
It is worth noting that shifting game approvals and content restrictions have posed persistent challenges to game developers and publishers in China. Following a nine-month on new video game licenses in 2018, the Chinese authority imposed another eight-month freeze starting in July 2021. Additionally, restrictions announced in 2019 to curb video game addiction among minors have been enhanced. These include revised content guidelines, a mandatory real-name registration requirement, a playtime limit of three hours per week, and a nightly curfew. Chinese gaming companies have had to adjust their business models and game designs to comply with regulations, implementing playtime tracking, developing content that adheres to cultural guidelines, and enhancing parental controls. All these measures have had an immediate impact on the industry, contributing to a continuous slowdown in game users since the peak in 2011.
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