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New Chinese regulations could spell trouble for gacha games

Draft rules that curb excessive spending may impact the gaming scene, for good and bad.

New draft regulations from China's National Press and Publication Administration (PPA) may spell trouble for the countries gacha game industry. These new regulations have three goals: to prohibit encouraging daily logins and / or spending, to warn players of "irrational consumption behavior", and to limit how much time and money players can spend in-game.

While these regulations don't specify the games these are aimed at, they are clearly targeted at those that either drain a lot of time or allow for excess spending. MMO's - notorious time vampires - are clear victims of the time limitations, whereas the country's gacha environment (renowned thanks to worldwide hits like Genshin Impact and Honkai Star Rail) are infamous for extensive microtransactions.

The impact on gaming companies as a result of this announcement is best seeable in the stock market, with the value of Tencent and Netease all falling significantly as a result. While the effects will most prominently be felt among Chinese players, the impact on worldwide users remains unclear.

However, it is worth noting that previous regulations have resulted in changes across all versions of popular Chinese games - take the 2018 ruling on loot box drop rate disclosure. As a result, games like Genshin and Honkai Star Rail make it clear to those interested just how likely it is to get certain rewards.

As for why this is happening, we can only speculate. China has thrown several curveballs at the technology sector over the years, limiting the amount of time those under 18 years old can play during week days being a notable example this year. These recent regulations from the PPA seem to have a similar goal - to prohibit what the Chinese government views as unhealthy or unacceptable.

As you can imagine, this could be a big deal for those gaming companies that rely on high playtime from its users, or a subset of big spenders to keep the lights on. The income brought in from various Chinese games is staggering - with Genshin Impact bringing in $54,000,000 in November from its global audience. Let's not beat around the bush here - while a sizable amount of this income comes from casual spenders, whales play a big part of the ecosystem here.

It may also spell the death of various features the wider player base deem positive, such as daily log-in rewards. Honkai Star Rail is one example of a recent game that has earned ample goodwill from its consumer base thanks to the distribution of free pulls to players who log in regularly. It's a good way of keeping players invested, even during quiet spells, but it does also feed directly into the more predatory aspects of the game.

A limit on spending may be beneficial for those who fall victim to the addictive aspects of these games. Much of the global live service gaming ecosystem is designed to make you spend big, and gacha games are certainly no exception here. There's a reason why lootboxes are considered gambling by various countries. This new wave of spending caps may be exactly what some players need.

It's a complicated issue. We'll have to sit back and watch how the Chinese gaming industry reacts to these new rules, and how it'll impact us over here in the West. Let us know what you think about this issue below!

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