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Tencent warns of more regulations ahead for gaming

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A logo of Tencent is seen during the World Internet Conference (WIC) in Wuzhen, Zhejiang province, China, November 23, 2020.

Aly Song | Reuters

GUANGZHOU, China — Tencent warned more regulations will likely come for the internet sector in China but said the company is “confident” it can be compliant.

The comments come after the Chinese technology giant beat market expectations to post a 29% rise in second-quarter profit, and as Beijing intensifies its regulatory scrutiny of the country’s internet companies.

“We should expect … in the near future, more regulations should be coming,” Martin Lau, president of Tencent, said during an earnings call on Wednesday.

Lau said that internet regulation is a “global trend” but China is ahead of Europe and the U.S. in terms of the “execution of a more structural regulation framework.”

“I think this should be expected because the regulation has been actually quite loose over an industry like the internet, considering it’s size and the importance,” he added.

The Tencent president said regulators are focused on “rectifying industry misbehaviors” and emphasizing social responsibility. But ultimately the goal is “long-term sustainable development of the internet industry,” according to Lau.

“The government does recognize the importance on the economic side and social side of the internet industry and also the contribution of the industry to global competitiveness,” Lau said.

I would say there will be short-term uncertainties and there are a lot of new regulations that will be coming, but we are pretty confident that we can be compliant.

Martin Lau

president, Tencent

Various Chinese regulators have come out with new rules for the internet sector over the past few months from anti-trust to data regulation. The speed and scope of the actions has wiped billions of dollars worth of value from China’s internet companies. Tencent’s stock is down 23% this year.

Still, the gaming giant, which has faced regulatory scrutiny in the past, said it will be able to comply.

“I would say there will be short-term uncertainties and there are a lot of new regulations that will be coming, but we are pretty confident that we can be compliant,” Lau said.

Gaming rules in focus

There is also growing concern that the online gaming sector could face tighter regulations after an article appeared in an affiliate of state-media likening online games to “opium”.

For a long time, the Chinese government has been worried about the impact of gaming on children. In 2018, regulators froze the approval of news games over concern that they were affecting the eyesight of youngsters.

In 2019, China introduced rules that banned those under 18 years old from playing online games between 10 p.m. and 8 a.m. and restricted the amount of time they could play.

Tencent has already introduced measures to enforce this, including facial recognition to detect children who are skirting the rules.

“On games, I think that the key issue at this point in time is still the amount of time and the amount of money that the minors spend on games. And this is an area that we are very focused on,” Lau said.

It is a “complicated issue requiring consensus of the regulator as well as the industry” — but it’s something the company wants to discuss, he added.

“If that can be achieved … I think most of the criticism on the gaming industry … will be resolved,” he said.


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