On July 23, the China Audio-video and Digital Publishing Association (CADPA) and the China Game Industry Research Institute jointly released a report on China’s gaming industry for the first half of the year. For the first time ever, China’s game industry has recorded a 'same time drop' of negative revenue growth and a decrease in users.

According to the report, total revenue in China’s game industry was CNY 147.78 billion (USD 21.88 billion), a year-on-year decrease of 1.8%. Revenue from mobile games, accounting for 74.75% of total industry revenue, declined for the first time ever. User numbers also have peaked: From 667 million during last year's Spring Festival (February 2021), the total number of users has fluctuated below 666 million, a year-on-year decrease of 0.13%. The main reason for the decline in revenue and users, CADPA thinks, is COVID, leading to decreased consumption and higher corporate costs. Also, there are several obvious factors behind the gaming industry’s troubles, for example, the government has almost frozen approvals of new games.

However, we found game license approvals have also begun to favor games that are educational in nature. We think this may be popular among parents but is unlikely to benefit the gaming companies’ bottom lines. The government’s ongoing squeeze on the 'platform economy' has resulted in hefty fines for Tencent, Alibaba and various other tech companies for monopolistic behavior, reducing their appetite for new product development and marketing in gaming and other sectors in which the government takes a dim view.

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