Update (0745ET): As CNBC's Eunice Yoon reports, Beijing has now republished the original Economic Information Daily article with a much softer tone, including removing the phrase "spiritual opium". Did Beijing perhaps underestimate how these new restrictions impacted the market?
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China's broad-based crackdown on perceived anti-social tendencies of its biggest corporations continued on Tuesday with a new industry being targeted: video games.
Beijing's latest attempt to rein in the excesses of capitalistic development - and reassert the "primacy of socialism", as Reuters described it - came Tuesday in the form of an article published by the Xinhua-affiliated "Economic Information Daily" which offered up a scathing critique of China's video-game industry and its impact on minors. The article asserted (citing anecdotal reports from teenagers) are spending up to 8 hours a day playing the country's most popular game: "Honor of Kings".
The article sparked a selloff in shares of Tencent, the purveyor of "Honor of Kings", and other major Chinese video-game stocks. In response to the article, Tencent announced strict new curbs for minors using its video-game platforms. The company said it would further curb minors' access to its flagship video game, allowing them just 1 hour of play a day (with 2 hours on holidays). Tencent shares dropped another 10% in early trade on Tuesday, wiping another $60 billion from the market cap of China's struggling tech behemoth. Even more so than Alibaba, Tencent has become the biggest market casualty of China's crackdown on everything from ridesharing, to payments, to music rights, to private tutoring - and now, video games.
Shares of Chinese companies including NetEase, game developer XD nd mobile gaming company GMGE Technology Group also saw heavy selling. The selloff even extended to the US, where shares of Activision Blizzard and Electronic Arts, Zynga and Take Two Interactive fell between 1% and 4% in premarket trading.
Tencent in a statement said it will introduce more measures to reduce minors' time and money spent on games, starting with "Honor of Kings". It also called for an industry ban on gaming for children under 12 years old.
The company did not address the article in its statement, nor did it respond to a Reuters request for comment.
The article published by Economic Information Daily was taken offline (though the print edition still carried the story), but Reuters highlighted some choice excerpts. One in particular caught our eye: the article blasted video games as "spiritual opium".
In the article, the newspaper singled out "Honor of Kings" as the most popular online game among students who, it said, played for up to eight hours a day.
"'Spiritual opium' has grown into an industry worth hundreds of billions," the newspaper said.
"....No industry, no sport, can be allowed to develop in a way that will destroy a generation."
It was later republished, with some of the more loaded terms (like "spiritual opium" removed) For China, the opium reference is freighted with historical significance, as Reuters reminds us.
Opium became a sensitive subject in China after it ceded Hong Kong island to Britain "in perpetuity" in 1842 at the end of the First Opium War, fought over the export of the drug to China where addiction became widespread.
As the blistering selloff gained momentum, another Chinese media outlet published a new piece offering some clarification on the crackdown. The piece sought to set aside the subject of blame, saying it would be "immoral" to blame gaming companies, and that parents and the broader community are responsible for addressing excessive gaming.
A separate opinion piece published by the China News Service on its official Twitter-like Weibo account hours after the Economic Information Daily article took a different tone, saying that blame could not be placed on any one party, including game developers, for child addiction to online video games.
"Schools, game developers, parents, and other parties need to work together," said the news outlet, which is also state-run.
The video-game crackdown isn't entirely unexpected. Beijing has sought to curb video gaming among teenagers since 2017.
What's ironic, really, is the "spiritual opium" reference. It's reminiscent of a popular Marxist axiom denouncing religion as "the opiate of the masses".
Well, in the US, the current "opiate of the masses" is an actual opiate: Chinese-made fentanyl, which is driving the worst overdose crisis in American history.