China bans foreign participation in Chinese gambling market

Sweeping new directive excludes foreign firms from the Chinese industry

China's online video gaming industry regulator, the General Administration of Press and Publication, has effectively banned all foreign participation in the vast Chinese market, a target of considerable potential for many ambitious Internet gambling operators.

The news broke Monday on the Wall Street Journal blog, which reported that the regulators have banned foreign investment in the domestic online gaming industry, along with bans on foreign investment in China’s online game operations through wholly-foreign owned enterprises, joint ventures and cooperatives.

Foreign investments are also banned from “indirectly influencing” Chinese online game companies by providing technical support or signing contracts.

The circular is apparently part of a government drive to eliminate unhealthy and illegal online content, and the blog recalls that in July this year the Ministry of Culture outlawed games that feature gangster themes or mafia-type gang activities.

"The implication is that foreigners have been behind some of the games with objectionable content," the blog observes, going on to quote Kou Xiaowei, vice director of the technological and digital department of GAPP, who said: “In recent years, some foreign companies tried to get involved in China’s online game operations in various forms, which caused severe disorders in China’s online game industry.”

To date, operators of some 45 domestic online games that violated the regulations have been punished by GAPP, according to the Chinese language media.

As far as the approval process for online games is concerned, the latest announcement states that no organisations or individuals may run online gaming businesses without a permit from GAPP. And once approved by the GAPP, games can go online without any additional permissions from any government departments.

Early last month, the State Commission Office for Public Sector Reform issued a notice clarifying the responsibilities of several state departments in the regulation of online gaming.

According to the notice, the Ministry of Culture is responsible for market supervision for the online gaming industry, while GAPP is in charge of managing the pre-approval process prior to the publication and distribution of online games.

China's online gaming market is one of the world's fastest growing, with sales expected to rise 30 percent to 50 percent this year to Yuan 24 - 27 billion according to official estimates from GAPP.

Industry observers note that the expanded ban will inevitably impact any proposed online gambling efforts in the Asian country.

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