Denver, CO


/ Cambridge, MA



Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

CCP Threatened by Games

China's increasingly hostile stance towards gaming and what it means for the industry

The CCP Is Not Gaming's Friend

Over the past year, the Chinese Communist Party (CCP) has imposed increasingly aggressive disciplinary measures to regulate big tech companies across a multitude of industries.

The Ant Group: Jack Ma’s Ant Group, an affiliate of Alibaba, was set to raise a record $37B (at a valuation of almost $300B) in November 2020 until the CCP’s intervention (Business Insider). Days before the IPO was set to occur, the China Securities Regulatory Commission dictated that the Ant Group was in violation of numerous regulations, and going forward it would need to follow roughly the same capital and leverage restrictions that traditional banks do (NYMag). The Ant Group is now required to provide regular updates and new initiatives (especially those that pose risk of lost personal and financial information) need explicit approval from the CCP. The Shanghai exchange suspended Ant's IPO on November 3rd and the company pulled its listing the same day (Business Insider).

Didi: China’s ride-hailing service was set to IPO in the US when regulators requested that it be delayed so a full security investigation of the network could be done. Didi refused and IPO’d in June, raising $4.4B (Reuters). Days later, the government blocked new users from signing up for the service and it was removed from all Chinese app stores (NYMag).

Meituan: The largest food delivery service in China came under increasing pressure by the public for fair treatment of their employees. In addition to an antitrust probe into Meituan’s food vendor exclusivity agreements, the government then dictated last month that Meituan must pay its workers at least the local minimum wage, provide them with social insurance, and ease delivery deadlines (Reuters). Following this announcement, Meituan lost $60B in market value (NYMag).

The EdTech Industry: The EdTech industry was one of China’s fastest growing sectors in 2020 - online tutoring startups alone raised $10B. However, for a multitude of reasons, the government dictated a policy to reduce homework load, raise education quality on services during and after school, standardize education services, and most importantly prevent the registration of new after-school tutoring institutions and force existing tutoring institutions to be registered as non-profits. This last measure bans tutoring companies from going public, raising capital, or investing or acquiring other education services, cutting the legs off of any potential growth in the sector.

What does this mean for gaming?: Generally speaking, there are 3 main reasons this is happening (SupChina):

  1. A desire by the CCP to redirect the economy toward more “strategic” industries (manufacturing and hard tech — semiconductors, batteries, “industrial internet,” and biotechnologies)
  2. Power dynamics between Chinese regulatory bodies
  3. Peaking public disenchantment

For the first reason, we see the gaming industry is at risk of even further regulation. Currently, the market is dominated by a duopoly (Tencent, NetEase) and has been consistently under fire for being harmful to the country’s youth. Some have gone as far to label Tencent and Netease as a “spiritual opium” (SCMP). If the CCP wants to refocus the economy toward more manufacturing and hard tech industries, increasing (already stringent) regulations on the gaming industry seems like a logical next step.

The report by the Economic Information Daily mentioned above has already triggered proactive action by Tencent to restrict playing time and spending behavior of gamers under 18 for the most popular and profitable mobile game, Honour of Kings. The game broke 100M DAUs (the general population of the UK and Canada combined) and $2.6B from IAP alone (SCMP). These restrictions limit gamers under the age of 18 to one hour of playtime on regular days and two hours on public holidays, down from a previous government directed 1.5 hours per regular day and three hours on holidays in 2019 (SCMP).

Tencent is no stranger to public scrutiny around its engagement with minors or setting playtime limitations. In 2017, following outcry by parents and teachers around youth addiction to video games, it restricted users < 12 y/o to one hour of play time each day (these users could also not log in after 9PM and had their spend capped) and those 12-18 y/o to two hours a day. To enforce this, in November 2018 Tencent began to require gamers to verify their ages and identities against police records by registering their Chinese national IDs. These were required to play any games from Tencent. This was introduced to 10 mobile games by the end of the year and expanded to the rest of the Tencent mobile portfolio by 2019 (The Verge).

This is not China’s first rodeo in regulating gaming either. In 2019, China introduced a law that banned minors from playing video games between 10PM-8AM and from playing more than 90 min a day during the week. To enforce this, on June 1, 2021, every game in the country was required to add a new authentication system (facial recognition) that checks a player’s Chinese national identity and their age (The Verge).

The Takeaway: The CCP has proven that they are not afraid to take on China’s biggest tech giants and restrict the content consumed by its citizens. Regulatory trends point toward a desire to set guardrails on companies and industries to refocus and benefit the economy as a whole. This will not only hinder innovation coming out of China, but also suppress a significant portion of the world’s gamers from contributing to the ecosystem. Gaming is an industry at risk for even further regulation, making us here at Konvoy cautious about the future and growth of gaming's largest geography (Newzoo).