China lifts ban on games consoles – but with what conditions?

It looks like China is finally ready to lift its 14-year ban on games consoles made by the likes of Microsoft, Sony and Nintendo, opening up a potentially lucrative and relatively untapped market. But (and it might be a very big “but”) – there will be conditions attached.

The ban

The Chinese Government banned gaming consoles back in June 2000. The driving force behind the ban was the perceived “corrupting influence” of gaming consoles on the minds of young people.

However, the ban has not stopped Chinese users from playing video games. Far from it. PC gaming is dominant and is understood to constitute around two-thirds of a market that is already valued in the region of $10-13 billion. Online gaming via connected devices (having exploded in the years following the 2000 ban) is also widespread. Finally – despite the ban – there exists a grey market for foreign console devices.

Shanghai: a new frontier

Back in September 2013, things began to change with the opening of the Shanghai Free Trade Zone – widely viewed as the Government’s “test-bed” for economic and policy reforms and one of its most ambitious economic experiments for decades.

At the time of launching the zone the Government announced plans to open up the games console market and that was confirmed by the State Council earlier this week.

So far so good for the games console industry.

But what about those conditions? 

1. Consoles have to be made in the Shanghai Free Trade Zone. The first big condition is that the consoles have to be made in the Shanghai Free Trade Zone. Import of the devices will still be banned. So for interested parties factory capacity will need to be developed within the zone.

2. Look out for the censorship rules. Devices and games will be subject to review and, of course, censorship. Government announcements couldn’t have been clearer on this point: “We want to open the window a crack to get some fresh air, but we still need a screen to block the flies and mosquitoes”. The specific rules will be written by China’s Ministry of Culture, a body responsible for monitoring media content. Although there is no fixed timeframe for the publication of these rules, one can make a pretty good educated guess about their focus. Indeed, comments at a press release on 10 January 2014 led by Cai Wu, head of the Ministry, probably tell us all we need to know: “Things that are hostile to China, or not in conformity with the outlook of China’s government, won’t be allowed”.

3. This might all be temporary. This is an experimental project and, it seems, may only be temporary. This reflects the “test-bed” nature of the Shanghai zone but won’t be hugely reassuring for international organisations considering ramping up factory capacity in the Shanghai zone with limited guarantees that the ban will remain lifted.

An opportunity that can’t be ignored?

But despite the conditions and despite various commentators pointing to an additional concern – the rampant nature of piracy in China – this development is undoubtedly huge news for the video games industry.

China is already the world’s third-largest video games market and by 2017 it is expected to surpass Japan to become second only to the USA. There is simply no ignoring a potential market of this size.

Matt Pollins

Author: Matt Pollins

Matt is an international technology, media and telecoms lawyer and Head of Commercial and TMT at CMS in Singapore. He supports clients across Asia-Pacific. You can contact Matt via the "Contact" page. Views expressed on Connected Asia are those of the author. Nothing here constitutes legal advice or creates a lawyer-client relationship.

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