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Tencent and NetEase games finally get Chinese approval

But popular titles still stuck in queue as market questions profitability of approved ones

Tencent is the world's largest video game publisher.   © Reuters

HONG KONG -- Tencent Holdings and NetEase, leading game developers in China, were given permission on Thursday by Beijing to sell some of their online games after months of waiting, a move cheered by the market even though it is unclear if these products will generate huge profits for either. 

Tencent’s two mobile games -- one that teaches players to make Chinese fans and another about traditional wood carving -- are among the 95 titles to be approved by Chinese regulators, according to a document published Thursday by the State Administration of Press, Publication, Radio, Film and Television. The Chinese watchdog also waved through NetEase’s "War Spring and Autumn," a fantasy role-playing game based on Chinese history.

“This is definitely good news for Tencent and NetEase as the two companies have shown that they could get approval from Chinese regulators,” said Cui Chenyu, an analyst at IHS Markit in Shanghai.

Chinese authorities began licensing new games again in December after a freeze from March, due to restructuring at the organization. Thursday's approvals were the fourth batch but the first for Tencent and NetEase titles.

Tencent faced growing criticism last year for producing video games with violent content amid allegations that children were becoming addicted. Shares in the Hong Kong-listed company slumped 29.9% to 330.20 Hong Kong dollars over the last 12 months while Nasdaq-listed NetEase shares lost 26.7% at $246.30 over the same period.

Despite the good news on Thursday, questions still remain about the profitability of those games that have been approved. “Since none of those three are the popular games produced by Tencent and NetEase, one could expect an insignificant contribution to the companies’ revenue,” Cui said.

The analyst pointed to the fact that one of Tencent's most popular games, "PlayerUnknown's Battlegrounds Mobile," a multiplayer online survival game it launched in May, was still stuck at the approval stage. The game has gained tens of millions of players abroad. But market observers say its bloody shooting scenes may not pass Beijing’s strict rules on violence and gore, raising questions as to how long Tencent may have to wait before it can cash in on its biggest hit.

Tencent reported in August its first quarterly profit drop since 2005. Company President Martin Lau blamed Beijing’s blocking of “PUBG Mobile” for the loss.

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