Recently, Tencent American Depositary Receipts (like stock) have dipped:
China’s economic system is one reason.
Video Game Restrictions
Almost two years ago, China proclaimed that anyone 18 and younger would have to diminish video game play time. During weekends and holidays,, the limit was three hours. For weekdays, no more than 90 minutes Then, making it worse for the gamers, no one on any day could play between 10 p.m. and 8 a.m. At the same time, gamers, 8-16 could spend up to $29/month (200 yuan) while older teens, 16-18, had a cap of 400 yuan.
As the creator of “Honor of Kings,” Tencent Holdings Ltd. would be especially hard hit. So, recognizing its plight, Tencent responded with some game time limitations of its own. Still though it faced a nine month suspension of new game approvals from Chinese regulators.
Now, China has taken the next step. Compressing allowable gaming time to one hour a day–between 8 and 9 in the evening-on Friday through Sunday, and public holidays, they also prohibited gamers under 18 from playing during the rest of the week. That adds up to a teeny three hours of game time a week. (Young gamers that I know play more than three hours a day.)
Our Bottom Line: Economic Systems
By enabling societies to produce and distribute goods and services, the three basic economic systems—the market, command, and tradition– answer three crucial questions. Those questions focus on what, how and to whom:
- What will be produced?
- How will land, labor, and capital produce goods and services?
- To Whom will the income flow?
The problem for Tencent and other gaming companies is that China created a clash between two of the three basic economic systems. As a firm that seeks profits, Tencent has dipped a toe in the market economy. A market system answers the three economic questions with little government interference. Instead many firms and consumers successfully satisfy people’s needs and wants by following their self-interest and making their own decisions. However, when China told Tencent to end its focus on profits and eliminate “money-worship,” it demonstrated the behavior of a command economy whereby government dictates economic behavior.
We can see the Yahoo chart that we began with displaying the reaction of the market to a command proclamation.
My sources and more: With active video gamers in my family, I was especially interested in China’s initial and subsequent video game restrictions. Then, for more detail and analysis about Tencent, Yahoo and The Guardian had the facts and the chart.
