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Govt curbs may take sheen off online gaming

By Wang Xing (China Daily)
Updated: 2009-07-11 11:16

The summer vacation is always a carnival for online gaming operators as millions of Chinese students indulge themselves lavishly in the virtual world of gaming.

But the festivities may be disrupted this year following the regulations banning online casino gambling and restricting the use of virtual currency.

The Ministry of Commerce and Ministry of Culture announced new regulations on June 26 to curtail trading in virtual currencies, prevent online gambling and restrict virtual currency from being exchanged for cash or used to buy real goods.

The regulations are expected to have a severe impact on the online gaming firms, which rely heavily on the sales of virtual items.

"The regulations will have a significant impact on the online gaming market as about 90 percent of the games operated in China have features based on odds and probability," said Yu Yi, analyst, Analysys International, a research firm.

He said the lottery games have been an effective way to stimulate players' consumption of in-game virtual items like weapons and dresses and accounted for nearly 10 to 20 percent of the revenues of Chinese online gaming firms.

Different from companies in the United States or Europe, Chinese online gaming companies allow users to play games for free and gain most of their revenue from selling virtual items in the game.

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That has made game operators to try everything possible, including instigating virtual battles among players and selling virtual boxes that randomly contain expensive virtual weapons, to stimulate users' spending. According to earlier media reports, some Chinese players had spent huge amounts to procure these virtual boxes in anticipation of getting a top-level weapon.

Although many online gaming companies like Shanda, The9 and Perfect World have declined to comment on the impacts of the new regulations, Giant Interactive said it would stop selling virtual boxes in its popular game ZT Online.

Tencent, China's largest instant messaging provider, also said in a statement that it would re-examine and adjust its game design to be in sync with the government requirements.

According to experts, this year's summer vacation could be an excellent opportunity for online game companies in China, especially after the shutdown of the Chinese servers of the popular gaming site World of Warcraft. Nearly 5 million Chinese players are expected to be in the market actively scouting for new games.

However, some domestic online gaming firms are of the view that the new regulations have forced many companies to adjust their game design and marketing strategy.

According to a report by research firm IDC and the game committee under China's Publishers Association (GPA), the number of online gamers in China reached 49.36 million last year, an increase of 22.9 percent over 2007. The number is expected to grow to 94.53 million by 2013, the report said.