China announced on Friday its latest set of regulations aimed at curbing the online gaming sector, causing a significant decline in the shares of major tech companies, including Tencent. The draft restrictions, released by the regulatory authorities, are designed to address concerns related to in-game purchases and compulsive playing behavior.

Tencent, a global leader in the gaming industry, saw its shares plummet by more than 15% in Hong Kong following the announcement. Rival company Netease experienced an even more drastic decline, with a decrease of over 30%. The repercussions extended beyond China, affecting international companies such as Naspers and its consumer internet arm, Prosus, which saw drops of nearly 14% and more than 12%, respectively.

This move marks a continuation of Beijing’s regulatory stance on the gaming sector, initiated in 2021 as part of a broader crackdown on major tech companies. The previous regulations included strict limits on the amount of time children could spend playing online games.

Despite initial optimism after the end of the freeze on gaming licenses, the newly proposed regulations introduce further restrictions. These include limits on recharging in-game wallets, the elimination of features encouraging prolonged gameplay, and the introduction of pop-ups warning users about “irrational” playing behavior.

The draft regulations also reiterate a ban on “forbidden online game content” that threatens national unity and security or harms the country’s reputation and interests.

Tencent, dominating the Asian gaming market and investing globally in game studios, experienced a staggering $54 billion loss in share value in the wake of the announcement, according to Bloomberg News. The impact was felt throughout Hong Kong’s Hang Seng Index, which dropped more than 4%.

“This will deal a blow to the overwhelming majority of games in China, except those that sell copies,” commented Zeng Xiaofeng, a vice president at Niko Partners, to Bloomberg. “Companies will need to overhaul their monetization models, including how they charge money from different tiers of players.”

While the new regulations pose challenges for established gaming companies, some independent studios view them as an opportunity. Cheng Gong, CEO of Chengdu-based Hanjia Songshu, suggested that studios focusing on innovation and high-quality user experience might benefit from the changes.

“The industry felt a bit like bad money driving out good money in the past,” Gong told AFP. “It’s a vicious circle.”