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Tencent finally gets some good news on gaming in China

Tencent's gaming nightmare in China appears to be coming to an end.Shares in the Chinese internet gia...

Posted: Dec. 21, 2018 12:17 PM
Updated: Dec. 21, 2018 12:17 PM

Tencent's gaming nightmare in China appears to be coming to an end.

Shares in the Chinese internet giant, the world's largest gaming company, rose more than 5% Friday, after a government official signaled a prolonged freeze on approvals for new games is finally coming to an end.

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"Approvals for the first batch of games have been completed, and we are working to issue licenses," Feng Shixin, a senior official at the ruling Communist Party's publicity department said at a gaming conference Friday.

The government had stopped issuing licenses that allow companies to make money from new online games earlier this year in China, the world's largest gaming market. The holdup was attributed to an overhaul of the government agencies that regulate the industry, but it also coincided with warnings from authorities about the violent content and addictive nature of some games.

The halt in approvals wiped billions off Tencent's (TCEHY) market value and led to a rare drop in profits in the second quarter.

But winter may now be over for Tencent and other gaming companies hit by the freeze on new licenses.

Feng asked the industry to be patient as officials work through the backlog in applications and made clear what the government expects from it.

"We hope through the new system ... we could guide game companies to better present mainstream values, strengthen a cultural sense of duty and mission, and better satisfy the public need for a better life," Feng said.

Despite Friday's jump, Tencent shares are still down about 35% from their all time high in January. Shares in Netease (NTES), a major Chinese game developer listed in New York, also rose in after-hours trading.

"For the Chinese gaming industry, this is obviously exciting news," Tencent said in a statement.

"We are confident that after [obtaining] license approvals, we will provide more and more excellent cultural works for society and the public," the statement said.

Tencent didn't respond to questions about what games it has in the pipeline for approval.

Earlier this year, it was still waiting for licenses enabling it to start making money from some of its most popular mobile games, such as "PlayerUnknown's Battlegrounds." Regulators also blocked a game called "Monster Hunter: World" for which big sales were expected.

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