Blog Post

China Bans Foreign Investment, Tech Partnerships In Its Online Games Industry

More U.S. gaming companies and VCs are looking to the Chinese online gaming model — micro-transactions, virtual goods and subscriptions — as a source of inspiration and potential investment. But as far as actually owning a piece of a money-making company like Tencent, consider it forbidden, as Reuters reports that the General Administration of Press and Publication (GAPP), China’s video game industry regulator, plans to start enforcing its ban on foreign investment in its online gaming industry.

The ban covers companies taking outright stakes, seeking to create JVs and co-ops, and even “influencing” Chinese gaming companies by offering technical support. GAPP official Kou Xiawei said China is enforcing the ban because foreign companies had increasingly been causing “serious market disorders” by illegally entering the gaming market, per ChinaDaily (via

The GAPP said it would start inspecting all online games this month, and “severely” punish companies violating regulations (via Pacific Epoch). What’s not clear is whether or how it applies retroactively to the IPOs of companies like Shanda (NSDQ: SNDA) Games and Changyou.

There’s also the issue of reciprocal deals. Tencent, for example, has invested in a number of U.S. gaming companies, most recently Riot Games, and is also slated to help launch Take-Two’s entrance into the Chinese market with NBA 2K Online, next year.