The video game industry in China currently is one of the major markets for the global video game industry, where more than half a billion people play video games. Revenues from China make up around 25% of the nearly global video game industry as of 2018. Since 2015, China has exceeded the contribution to the global market from the United States. Because of its market size, China has been described as the "Games Industry Capital of the World" and is home to some of the largest video game companies. China has also been a major factor in the growth of esports, both in player talent and in revenue.
China has not always been a major factor in the industry, having been on the verge of economic recovery during the industry's formulative years in the 1970s and 1980s. With the introduction of the second-generation home gaming consoles in the mid-1980s, a new black market of illegally-imported goods and video game clones arose to avoid the high costs of imports, driving away foreign companies. Notably, China imposed a near-complete ban on video game consoles in 2000, fearing the addiction-like impact of games on its youths; the ban was ultimately lifted in 2015. During that time, China's video game market greatly expanded in the area of computer games (including massively multiplayer online games, browser games, social network games, etc.) and later mobile games, all which could be free to play titles with monetization to appeal to the average lower income of Chinese players. This massive growth from 2007 to 2013 led the games' publishers and operating companies like Tencent and NetEase to become large global companies. Despite the legitimate growth of the industry, China's video game market continues to be offset by illegal importing, copyright violation and intellectual property theft.
As with other parts of its media, China's government has strong oversight of the video game industry; all new titles go through a governmental approval process to assure that content aligns with the nation's values. In 2018, an approvals freeze due to the reorganisation of China's content vetting agencies caused numerous game releases to be held up. The video game market plummeted for a year. The government also fears the potential for its youths to become addicted to video games, and have required games to include anti-addiction measures. User verification is used to enforce playtime restrictions, which currently limit minors to three hours per week.
History Broadly, the growth of the video game market in China is tied to expansion of its technology and digital economy from the 1990s to present day, which by 2016 represented over 30% of its gross domestic product.
Initial growth (1980s–2000)
At the time that the video game industry was being established in North America in the 1970s, China was in the midst of major political and economic reform following the death of Mao Zedong in 1976. The country was technologically behind much of the rest of the world in terms of its media. Part of the reform was modernization of its media systems, helping to boost economic prosperity for citizens. As such, China saw little of arcade games or the first generation of home consoles, like the Atari 2600 and locally made Pong consoles.
By the 1980s, China's economy had significantly improved. After the video game crash of 1983 which devastated the North American video game market, Japan became a dominant factor in the global market leading off the third generation of consoles such as Nintendo's Famicom. The first widely-available video games in 1980s China were arcade games. The number of arcades in China increased significantly during fall 1985.
Consoles were introduced to China in the late 1980s and were primarily imported from Japan. However, importing these into China was costly, with a 130% tariff on hardware and games along with value-added taxes. Console systems were in high demand, but because of the high costs of importing, only few foreign companies did so. This created the video game clone grey market in China – manufacturing of reverse-engineered consoles and games at much lower costs than imported system, even if this required dubious or illegal copyright infringement. Outright copyright theft ("piracy") was also rampant in China due to the country's poor intellectual property controls. The sales of cloned console hardware and games outpaced that of legitimate imports, and further drove many foreign companies away since they could not compete with this area, such that by the 1990s, most video game systems in China were manufactured there. Xiaobawang Company created the first Chinese-produced console; later consoles came with a keyboard, or were the keyboard, and were intended both for gaming and educational purposes. By the end of 1993, over 60% of secondary school students in Beijing owned a gaming console. China also had a small market of legal consoles. Sega released the Master System in the late 1980s as the first officially distributed console in China ever, and in the 1990s it continued to distribute newer systems. The most popular was Mega Drive, which like Famicom was cloned by local manufacturers. Sega was one of the most famous arcade producers alongside Namco in the region. Nintendo entered in 1994 with the Game Boy and Super Nintendo through a Hong Kong distributor. There was also a market for smaller producers like UMC with Gamate and Super A'Can.
As home ownership of computers in urban China increased after 1995, the Chinese PC games market grew significantly.
Console games continued to grow in popularity through the 1990s, which created a broader concern in the media of video game addiction, with terms like "digital heroin" being used to describe video games. Even before the 1990s, there had been a broader stance in China that video games created negative effects on those that played them, which only grew during this decade. The impact on youth was particularly of concern, as video games were known to detract students from schoolwork, leaving them unprepared to enter China's college system. This situation was further increased by China's one-child policy, with children having less siblings, few others to interact with, and little to do outside of school. The anti-addiction facet also discouraged foreign companies from trying to break into the Chinese market.
Chinese console ban (2000–2015) The concerns about video game addiction and negative influence on the youth came to a head in June 2000. The State Council passed a bill crafted by seven ministries specifically aimed at video games. The bill established certain provisions on video game content and regulations on operations of Internet cafés and arcades. The most significant facet of this bill was a ban on the production, import, and sale of consoles and arcade machines. However, the ban was poorly enforced, resulting in consoles being available on the gray market, often hacked. Importers, however, did not hide it from the government, and their stores could be found in large shopping malls. Despite this, the ban resulted in limiting of supplies and very high prices, far beyond the average citizen. The alternative was 8-bit and 16-bit clones manufactured in China in government-approved forms, such as educational computers, plug'n'plays, dvd players and handhelds. Global video game producers also attempted to enter the market with government approval, notably Sega Pico in 2002, Sony's PlayStation 2 in 2004 and several of Nintendo's consoles rebranded under the iQue partnership. However, with the restriction on game imports and their content, high price, huge piracy, outdated graphics, these consoles did not catch on in China. The ban did not include games available on personal computers (PC), and as a result, the PC video game market in China flourished over the next fifteen years. Internet cafés flourished, growing from 40,000 in 2000 to over 110,000 by 2002, and have remained numerous since.
The ban on arcade machines was dropped in 2009, but while arcade were permitted to operate, they had to take several safeguards to prevent excessive use by youth. However, since such arcades offered a low-cost way to play games without a PC, they still became a thriving industry comparable to PC gaming at internet cafés. As a result, Chinese gamers frequently visit the arcades to play action games, particularly fighting games, and occasionally unlicensed arcade ports of popular PC or mobile games such as Angry Birds or Plants vs. Zombies.
Online gaming (2004–2008)
Legitimate acquisition of games and the hardware to play them was still relatively expensive in China, which continued to fuel the video game clone market in China. A large number of PC gamers in China acquired software through illegal downloads and pirated software websites to avoid the cost. Developers of legitimate games in China recognized that, to compete with this black market, they had to develop games that had a free or low upfront cost model but offered a way to monetize their games over time. Many Chinese-developed games became online games offering numerous microtransactions to recoup costs; such games could be offered at Internet cafés, which became a popular option for Chinese players that could not afford computer hardware, even as the price of computing equipment dropped over the next decade. This created a boom of massively multiplayer online games (MMOs) in the Chinese market and which helped to establish market dominance of companies like Tencent, Perfect World, and NetEase. PC cafés proliferated in urban centers as China's population continued to grow. Western free-to-play and subscription-based games like Dota 2 and World of Warcraft, poised to take advantage of this model, also became successful. It also prompted Chinese developers to develop numerous clones of popular Western games that they would offer at low cost, an issue that still persists presently.
Online gaming became of serious concern to the government around 2007, re-raising the issues of gaming addiction that had prompted the 2000 console ban. A government report claimed that 6% of teenage internet users, amounting to 3.5 million young people, were playing online games more than 40 hours a week. In July 2007, the government required that online game publishers and operates incorporate anti-addiction software on their games, specifically by monitoring how long underaged persons played. If a minor played for more than three hours straight, the game was to wipe half of any in-game currency that had earned that session, and lose all credits if played for more than five hours. Additionally, these systems were required to have the player to log in using their national identification. However, at the time of implementation, not all publishers incorporated the required controls, and for those that did, players would find ways around the limitations, such as using family member IDs, or otherwise would simply play past the time requirements as there was nothing else to do beyond the video game.
Social and mobile gaming (2008–2014)
By 2007, the size of the Chinese video game market was estimated to be about with around 42 million players, having grown 60% from the previous year mostly driven by online gaming. At this stage, China's impact on the larger global market, valued at , was not considered significant, as much of it was still driven by the grey market for clones and pirated games. However, the rapid growth led to forecasts that China would be a major contributor to the global market within five-years time.