The Chinese government should end tax breaks for gaming companies as they have grown into global firms, a state-backed newspaper said yesterday, in the latest threat to the multibillion-dollar sector to stem from state-controlled media.
The online gaming industry, which made revenue of 130 billion yuan (US$20 billion) in the first half of this year, has been the subject of several menacing state media reports in the past few days, with one article calling such games “spiritual opium.”
The negative headlines have fueled concerns that the sector is next in line for the regulatory axe, which has cut into large tech firms, from e-commerce behemoth Alibaba Group Holding Ltd (阿里巴巴) to ride-hailing giant Didi Chuxing Inc (滴滴出行), hammering share prices.
Yesterday, state-owned newspaper Securities Times said that the “gaming industry has now grown strong” on the back of preferential tax policies for the software industry and subsidies doled out to encourage development.
“With these software industries having developed ... the government no longer needs to continue providing industry support,” it said.
“In this regard, the gaming industry should be mentally prepared,” the piece added, without citing any specific companies.
Investors have grown jittery with regulators taking aim at tech corporations over monopolistic practices and data security, while more recently forcing the immense after-school tutoring sector to go non-profit.
After the report published on Tuesday by the Economic Information Daily calling gaming “spiritual opium” circulated widely, the share price of sector giant Tencent Holdings Ltd (騰訊) lost US$60 billion at one point, Bloomberg News reported.
The reference was, within hours, edited out of the piece.
Tencent’s share price yesterday fell 3.7 percent in Hong Kong trading, while rival NetEase Inc (網易) lost 5.1 percent.
Bilibili (嗶哩嗶哩), which also has mobile games, was down 4.3 percent in Hong Kong.
“Admittedly, China’s online gaming industry is part of the broader tech space, but this is the second government mouthpiece to take a shot at the sector this week — and you ignore the not-too-subtle warning at your peril,” Oanda Corp analyst Jeffrey Halley said.
In related news, Tencent has resumed signing up users for its WeChat messaging app, days after suspending registrations for unspecified technical upgrades.
WeChat, which has more than 1 billion users, last week halted signups to undergo a “security technical upgrade” to comply with regulations.
At the time, the company said that it expected to resume new individual user registrations at the beginning of this month.
The user suspensions coincided with a notice from the Internet industry overseer, which said that it was introducing a six-month campaign to rectify illegal behavior online, including the blocking of external links, as well as the collection and storage of data.
Additional reporting by Bloomberg
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