In a new sign that Beijing may be preparing to ease its ongoing crackdown (opens in new tab) on the gaming industry, China's top gaming industry group released a report today saying that the problem of gaming addiction among Chinese youth is "basically solved." Well, maybe it wasn't such a difficult problem to solve.

According to The Financial Times (opens in new tab), China's Gaming Industry Group Committee, part of the Chinese government's gaming regulator, found that 70% of Chinese minors currently play games less than three hours a week. This comes after the Chinese government limited online game playing time for under-18s to one hour a day on Fridays, Saturdays, and Sundays (open in new tab) in 2021.

The news comes after an editorial in last week's government-run newspaper People's Daily (open in new tab) argued that China cannot afford to ignore video games as long as its rivals in the European Union and the United States give them "extremely high economic, technological, cultural, and even strategic value. The article was prompted by an editorial by Beijing. The editorial was taken as a sign that Beijing was softening its previously hard-line stance on video games and the broader high-tech industry, and Chinese video game stocks rallied. With the release of this report, they may have been right.

The offices of Tencent and NetEase must be filled with a mixture of anxiety and excitement. China's largest and most well-known gaming company has endured the worst of government neglect policies. They have struggled to get their games approved and, in the case of Tencent, have lost their status as China's most valuable companies to liquor companies (opens in new tab). There will be a lot of white knuckles being clenched in these companies now, waiting to be pulled out of the rug.

Experts interviewed by the FT expect the overall number of approvals to be lower than before the crackdown, and the freeze on game approvals to end in early 2023, although censorship will be tighter. Tencent, on the other hand, said on its earnings call last week that it is "fully compliant" with Chinese regulations and expects to receive more approvals in the future