China Resumes Online Games Approval, Ending Eight-Month Hiatus

China has issued its first batch of online game licenses, effectively ending an eight-month suspension of regulatory approvals, but analysts say a more stringent review process will remain in place for the foreseeable future.

In a move that caught many by surprise, the National Press and Publication Administration published a list of 45 domestic games on Monday night that had been approved by the regulator. It marks the first time China has approved any games since July last year, as authorities had said their focus would be on adopting new measures aimed at protecting youth and curbing addiction.

Although the initial approvals came faster than previously expected–with market watchers once predicting that China could even extend its online gaming freeze to the end of this year–what is noticeably absent from Monday’s list are the names of industry heavyweights Tencent and NetEase. The two gaming giants weren’t included in this first batch of approvals, which does include titles developed by search engine operator Baidu, Shanghai-based games developer Lilith and Shenzhen-based developer iDreamsky Technology.

Investors viewed the approvals as a positive sign for the sector and pushed shares of Tencent higher by as much as 5% in Hong Kong on Tuesday. NetEase gained 4.2%. A spokesperson from the Hangzhou-based company said NetEase had no comment on the resumption of online games approval. Tencent did not respond to an e-mailed request for comment.

Cui Chenyu, a Shanghai-based senior analyst at market research firm Omdia, says uncertainties remain as to when China would approve more titles. But compared with years past, there is little doubt that the pace of the regulatory approvals would come at a slower pace, and fewer games would receive the required licenses.

This is because authorities want to continue to dissuade underage children from playing online games, and protect them from what they believe to be an addiction. Ke Yan, head of research at Singapore-based DZT Research, says regulators are also intent on reducing the amount of violence in the games, while telling developers to add more elements that promote Chinese culture.

Ke estimates that the regulator will only approve several dozen titles each month going forward. Long gone are the days when China used to release hundreds of online games each month. This year’s pace may turn out to be even slower than last year, when China approved an average of about 80 titles per month before entering into the prolonged hiatus.

Amid the current environment, developers are turning their attention to markets abroad. Tencent, for example, has been investing in emerging studios, hoping to find promising titles that it could help distribute overseas. In the fourth quarter, international games generated $2.1 billion in sales for the company, rising 34% from the same period a year ago. Revenues from domestic titles grew a mere 1% to $4.6 billion, which was largely due to sales from older titles such as Honour of Kings and League of Legends: Wild Rift.