Game room in China ©️ StockSnap / Public Domain / Pixabay
Introduction
The beginning of the gaming and esports industry was not easy. Even after the economic reforms known as the “Opening of China” (改革开放) initiated by Deng Xiaoping in 1978, when foreign investments began in China, this sector of the economy still had to wait a while for its chance, and even then it encountered considerable difficulties.
After a dramatic increase in the popularity of video games in the 1990s, the Ministry of Culture deemed them harmful to society and video games were banned in 2000 (this restriction lasted until 2015) (“Marketing to China”, 2021). But the multi-million gaming and esports industry was born despite the ban. In fact, computer games were not covered by these regulations. Moreover in 2003 China’s General Administration of Sports officially recognised esports as a sport (Yang, Wang, Chiang Siu Ling, 2020), making China one of the first countries which decided for such a move. And now, titles such as ‘esports operator’ or ‘esports professional’ are granted for esports players by the Ministry of Human Resources and Social Security, which acknowledges esports as a career (“GGRecon”, 2021). On the other hand, China has recently tightened its regulations for online games players under the age of 18. So what are the prospects and challenges of the gaming and esports industry in China?
Gaming and esports industry in China: taking the bitter with the sweet
Let’s start with some key figures. Number of mobile gamers has exceeded 654 million, of which 43.7% are females. Gaming revenue has reached 41 billion USD with 21% of annual growth. Market size of the esports sector has totalled 147 billion CNY (and it is constantly growing). The gamers have spent more than 278 billion CNY on video games (Statista, 2021). The Chinese gaming and esports market is the biggest in the world, generating enormous income and having a chance to grow even bigger with growing interest in the gaming and esports sector and increasing consumer spending. The chances exist also for foreign companies and brands. In 2020, estimated overseas share in game market revenue in China was 26% (Statista, 2021).
European-Chinese cooperation in this field is developing promisingly. For example, Swiss gaming accessories “Logitech G” were extremely popular with Chinese consumers and the Logitech Company further increased its revenue by sponsoring professional esports teams and encouraging people to buy products used by their idols (“Marketing to China”, 2021). In 2018, the ‘Europe China Video Game Association’ was created and since then it facilitates connections between European (mainly French) and Chinese video game companies and professionals. On September 24th, 2021 the ‘Europe-China Gaming & E-Sports Industry Connect’ took place both online and offline (in Shanghai’s Anandi Hotel), one of the many events to support the European SME sector with its exploration of Chinese market and to matchmake the potential partners from Europe and China.
The Chinese market inevitably has potential for European and other foreign businesses, but is also full of obstacles. The 2000-2015 ban on video games mentioned earlier has hit foreign companies such as Sony and Nintendo the hardest (“Marketing to China”, 2021). And after years of active investment favouring the development of the gaming and esports sector, Beijing has recently surprised everyone with new, tighter restrictions on players. Now, minors are allowed to play video games for only one hour from 8 p.m. to 9 p.m. on Fridays, Saturdays, Sundays and on public holidays (Reuters, 2021). These restrictions are intended to help combat the growing problem of gaming addiction among children and youth in China. However, there are voices among professional esports players and others that the new regulations will halt the development of esports in China, ceding dominant positions to the rivals from the USA (“Financial Time”, 2021). In tandem with these restrictions, there have also been reports that the authorities will slow down the approval process for licences for new online games, both Chinese and overseas (“South China Morning Post”, 2021). All of this added to already existing regulatory barriers, such as the requirement to work with a local distributor when bringing a foreign title to China (International Trade Administration U.S. Department of Commerce, 2021).
What does the future hold?
Earlier this year, the “People’s Daily Online” saw a bright and promising future for esports in China mentioning, among other things, the victory of the Chinese esports team at the Asia Games in Jakarta, Indonesia in 2018 over South Korea in the League of Legends final (3:1) and the fact that the next Asian Games with the esports event will be held in Chinese city Hangzhou in 2022 (“People’s Daily Online”, 2021). Then the Central Government started to fight against gaming addiction among young people and everyone involved in the gaming and esports industry held their breath. Will the new restrictions stop the development of the gaming sector and the recruitment of new talents to Chinese esports teams? Looking back at the ban introduced in 2000 on video games, which was not able to stop the gaming and esport market back then, this seems rather unlikely.
Foreign companies, including European ones, may wonder whether it is worth entering the Chinese gaming and esports market in the face of so many hurdles. After all, it's well known that the Chinese market is different from other parts of the world, even Asia itself: it requires a vast knowledge and preparation, simply the Chinese know-how is a must. But it is developing dynamically and guarantees access to hundreds of thousands of potential consumers ready to pay for the entertainment provided by computer games. So the question is not whether there are opportunities but rather how to seize them without being defeated by obstacles.
Anna Oliwia Wierzbicka is a member of European Guanxi. She comes from Poland. In 2020, she graduated with honours from the Beijing Language and Culture University with a BA in Chinese Language. Currently she is interning at the Centre for International Relations in Warsaw (Poland) as a part of her Erasmus Mundus Joint Master Degree in Euroculture at University of Strasbourg (France) and University of Groningen (the Netherlands). You can find her on LinkedIn.
The opinions expressed here are those of the writers and do not represent the views of European Guanxi.
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References
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