A Closer Look at China’s New Online Game Rules

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Yes, this story is now a couple days old. It took me that long to wade through the new rules because I put a low priority on the task. Why? Well, the new rules are nothing special and will not shake up the industry. Moreover, although the new rules include additional requirements for foreign game developers, the basic dynamics of the industry for foreign game companies have not changed.

OK, so we’re talking about the “Online Games Interim Measures,” announced on June 22 by the Ministry of Culture. These new rules (let’s call them the “Measures” for fun) will take effect on August 1 of this year. Sina has the full text in Chinese here.

Although the MOC took the lead here, the Measures is actually a joint work from MOC and the Ministry of Finance. The Measures also deals with virtual currencies, which is why the MOF is involved.

The Measures is fairly long, considering that it applies to a narrow business sector. The content is probably also incredibly boring for most folks, so let me start off with some organization. The Measures contains requirements that apply to:

1) Game operators;

2) Game developers;

3) Users/players of online games.

Note that the Measures will have a variety of secondary effects on gamers, but the rules themselves in that regard apply to the operators and developers. For example, the Real ID system (see below) is an operator requirement, not a user responsibility per se.

Let’s take a look at the text.

Chapter One “General Provisions” is the usual vague policy pronouncement stuff you’d see in a Preamble. Nothing too exciting here, although the Measures does set out definitions of online games, game operators, and virtual currencies, which is useful. There is also a specific reference to MOC as the applicable authority in this area — rather important, actually, as the Internet has been the subject of some very spirited government agency turf fights in recent years.

Chapter Two addresses game operator requirements. This is rather straightforward and reads like any other Chinese law dealing with a restricted industry. Key here is the minimum registered capital (RMB 10 million) and the application process for an operating license, which lasts for three years.

The good news for game operators is that license approval has been pushed down to local authorities (provincial MOC or lower), which means it should be relatively quick. That’s another reason why I do not see the Measures as putting any serious roadblocks in front of game enterprises.

Chapter Three covers content restrictions. I know that this is a traditionally sexy topic, particularly for foreigners, but believe me when I say that there is nothing new going on here. In fact, the text here reminds me an awful lot of the Advertising Law (and similar content rules) — this is not trailblazing stuff but more of an exercise in ‘cut and paste’ lawmaking.

The old chestnuts here should be familiar to most of you, and include restrictions on content that violates the Constitution, harms national sovereignty, calls into question the territorial integrity of the country (such as certain island provinces and Western regions), divulges State secrets, promotes cults (you know which one they care about most), uses obscenity or pornographic images, and so on. The list also includes the usual catch-alls and restricts content that violates social morals, China laws, and anything else the government decides in the future. Had enough?

A few articles are devoted to the content review process, but there’s nothing much new there. Censorship/government oversight in this industry is old hat at this point. A few news accounts I’ve seen have latched on to a provision in the Measures that sets forth the content review process for imported foreign games. To the extent that this provides additional information for that application process, that’s a good thing.

However, this is not really a big deal for imports. Foreign developers do not deal with content review applications themselves; the domestic operator licensee handles all that for them. Nothing in the Measures suggests that this dynamic will change in the future. If you are a foreign developer looking to license a game into China, you will have to follow these rules, but you won’t be running into the MOC in person with your application, so don’t sweat the details.

Moreover, as is the custom for Chinese laws, the list of required documents for import game applications includes the infamous “Other documents” as required by the approval authorities catch-all. This is still a fairly new industry, so the possibility that the MOC will alter the list of required docs in the future is pretty high.

Chapter Four first covers some operations issues, such as safety for minors. Most of this is vague language that sets aspirational goals and, as such, will generally be ignored unless and until the MOC decides that it wants to crack down on the industry for egregious violations.

More important in this section are requirements on the use of virtual currencies. This is a bit complicated, so I’ll reduce it down to a guiding principle: virtual currencies should be limited to use in games (and related activities) and should abide by relevant legal (e.g., consumer law) principles. Not perfect, but I think that sums up the spirit of the provisions.

Last, but certainly not least, in this section is the requirement for implementation of a Real Name ID system for players and for operators to archive registration information.

What does this mean? On its face, it means that operators must require sufficient identification (in China, this means a person’s ID card) to ensure that they know who is really signed up and playing. Similar measures have already been introduced for other activities, including most recently online comments (a post I wrote about online abuse, the impetus for such rules, can be found here on China/Divide).

Within the context of the “problem” of “Internet Addiction,” the Real Name ID system makes sense, at least with respect to minors. Ostensibly, knowing who is playing, and how often/long, might be useful for public health reasons.1

Whether player information would ever be collected and shared with concerned parents is an interesting possibility for the future. Remember that earlier this month, new rules from the MOC came out with guidelines on parental supervision with respect to online games (my comments can be found here). The legislative intent here is clear and is no joke.

Chapter Five covers legal responsibility for game operators. This is another “boilerplate” section commonly found at the end of China laws. The usual penalties and proscriptions are trotted out, including a possible fine for violations of between RMB 10,000 and 30,000. For the big boys in the industry, that is not going to make them lose any sleep.

Chapter Six “Supplemental Provisions” is just an add on for a couple of issues that couldn’t be neatly fit into the rest of the text. Nothing of interest here.

So there you have it. Anything earth-shattering here? No, not even close. As was the case with the new rules on online payment services that I discussed earlier this week (see here), most of this is standard operating procedure.

The government is still very serious about content and the public health effects of gaming, ridiculous as the latter may be. The Measures suggests that the government will be keeping an eye on operators via licensing, which also gives the authorities additional punishment options it can mete out for wayward firms. The MOF, not to mention the PBOC and CBRC, continues to be very sensitive about the use of virtual currencies.

But on the whole, nothing much has changed. Online games have always been, and will remain, tightly regulated and restricted to domestic operators.

  1. Just for the record, I find the whole “Internet Addiction” epidemic to be laughable, but from a legal standpoint, the general concern certainly justifies the Real Name ID system. []