China seems to reverse its strict stance on the gaming crackdown.

China appears to have reversed its stance on strict regulations aimed at curbing what regulators considered “excessive” gaming. The National Press and Publication Administration (NPPA) had initially proposed rules to limit the amount of money and time individuals spent on video games. However, as of Tuesday, the draft rules were no longer available on the NPPA website.

China holds the title of the world’s largest online gaming market, but the gaming industry has frequently clashed with regulatory authorities. The proposed rules sought to restrict in-game purchases and target incentives like daily log-in rewards. Additionally, there was a proposal for a pop-up warning system to alert players of “irrational” behavior.

Following the apparent reversal, share prices of Chinese gaming companies, including Tencent Holdings and NetEase, experienced a significant boost. This positive shift came after a sharp decline in December when the rules were initially introduced, causing a nearly $80 billion drop in the combined value of the two companies.

Despite the recent market rebound, analysts highlight lingering uncertainty about the government’s future actions in the gaming sector. The industry remains in a state of ambiguity, with questions about potential regulatory changes and the overall direction of government policies. Analysts suggest that this uncertain sentiment may persist until there is a substantial shift in government rhetoric or the implementation of supportive policies, the timing of which remains uncertain.

In 2021, China implemented its most extensive crackdown on gamers by imposing restrictions on children, limiting their playtime to one hour on specific days. During the same period, the government suspended the issuance of gaming licenses for eight months. Consequently, many Chinese developers have redirected their focus towards international games, with companies like NetEase and Tencent acquiring or investing in foreign enterprises in countries such as France, Japan, and the United States. The ongoing uncertainty raises questions about whether this situation will lead to another surge in overseas expansion for Chinese gaming companies.