Sector shrugs off COVID impact this year, resumes strong momentum

Better times are on the horizon for Chinese gaming firms seeking expansion, given the continued recovery trend in the domestic market, supportive regulatory policies and blossoming emerging technologies, analysts said.

They said China's gaming industry has gradually resumed strong growth this year despite headwinds and the "scarring effect" of the COVID-19 impact, with the sector set to continue a steady run for the rest of the year.

The highly lucrative market generated revenue of 28.61 billion yuan ($3.9 billion) in July, with a nearly 40 percent year-on-year increase and an over 3 percent month-on-month rise, said a new report from Chinese gaming database Gamma Data Corp.

Mobile gaming remained the largest segment, producing revenue of more than 22 billion yuan in July, an over 50 percent year-on-year growth.

In the first half, the number of China's gaming participants hit a record 668 million, up 0.35 percent year-on-year, said Gamma Data.

Wang Xu, co-founder and chief analyst at Gamma Data, said China's gaming industry will rebound steadily in the rest of the year given rising consumer demand, better performance of existing game titles as well as robust growth of new game titles.

The National Press and Publication Administration has granted approval for a total of nearly 700 domestic online game releases so far this year, with the latest approval of 89 domestic online games in September alone. Last year, the nation granted nearly 500 domestic online game authorizations.

In August, authorities granted licenses to 31 imported online games, including titles belonging to China's leading technology and internet companies such as Tencent Holdings and NetEase.

It was the third group of foreign online games to receive publishing licenses since December, when the NPPA approved the first group of 44 foreign games last year. It also approved 27 foreign online games in March.

Wu Baokang, an analyst at data intelligence services provider iDigital, said the country is sending positive signals for a more supportive regulatory policy toward the gaming sector, bringing rising growth opportunities for gaming companies both at home and abroad.

Compared to 2022, Wu said he expects to see more batches and a higher number of foreign online games receive publishing licenses this year, saying the country will welcome more high-quality foreign game titles.

"With the resumption of production as well as a gradual rebound in consumption, China's gaming industry will likely witness a strong rebound in 2023," Wu added.

The National Bureau of Statistics said the official snapshot of fresh signs points to a steady economic recovery, as China's industrial output and retail sales jumped 4.5 percent and 4.6 percent year-on-year in August, respectively, up from 3.7 percent and 2.5 percent increases in July.

Looking ahead, Zhang Yi, CEO and chief analyst at iiMedia Research, said he expects to see a rising number of new game tiles in the rest of the year, adding that emerging technologies such as artificial intelligence will also benefit the development of the gaming sector.

Wang Yi, senior vice-president of NetEase, said gaming companies need to continuously invest in cutting-edge technologies such as AI to promote high-quality development.

Wang said that currently, AI has helped boost NetEase's work productivity by 90 percent in key areas including concept art generation, motion capture and model generation.

Looking forward, Wang said Net-Ease will not only apply cutting-edge technologies to games, but also bring technologies to the outside world in fields such as industrial production, automated agriculture and digital culture and tourism.

"We are embracing a new round of technological change, which will create new growth opportunities for the gaming industry. We will be dedicated to investing in forward-looking technologies boosting innovation, jointly working with other market players to spur the development of China's gaming industry," Wang added.

Gamma Data said NetEase's relevant artificial intelligence-generated content (AIGC) services have covered all products, benefiting nearly 1 billion users. And NetEase has already unveiled several self-developed giant models, covering more than 100 application scenarios.

Gamma Data noted that AIGC technology has significantly improved user experience, and it has further strengthened Net-Ease's content development efficiency in multiple fields and leveraged its experience to serve other enterprises.

Citing the new report, Wang Xu of Gamma Data said AI-generated content will significantly boost the high-quality development of gaming content, adding that over 60 percent of leading Chinese gaming firms have already tapped into AIGC fields.

Among such firms, 27 apply AIGC to their research and development, marketing and operations; 12 use the relevant technologies to offer solutions for other sectors or enterprises, and nine choose to focus on fields including digital people and the metaverse, according to the report.