The biggest news out of China for the week so far is that the jurisdiction has been settled for the Ministry of Culture and the GAPP with regard to regulation of online and other video games. There has been confusion and in the past some written announcements indicating one agency over another for certain aspects of game industry regulatory policy, but this latest announcement "feels" settling. The end result is that GAPP still controls content approval for online games and foreign online games, and the MOC essentially has authority over most else, including oversight of the online games once they have been approved and launched. And any game that does not go through the approval process will be dealt with by the MOC, not the GAPP.  Along with some rumored key personnel changes within the GAPP, the change in regulatory authority might be well timed for the continued growth of the industry.

Dean Takahashi wrote a provocative article worth reading about potential trade concerns regarding China's regulatory policy over foreign games and game consoles. Niko thinks that the issue is worth considering, but emphasizes that there is no proof at all that the regulatory policy is intended to damage trade relations or that it is anything more than coincidental that several policies have negatively impacted foreign companies trying to enter the vast Chinese games market. The market has grown quickly and Chinese regulators have necessarily kept that growth in check to a certain degree. The savvy gamers will demand a wider range of games and options beyond the Chinese developed products for PC online gaming, and at that point perhaps the foreign companies will find a more receptive audience in China to sell their products.

There have been several IPOs of Chinese online game companies in the past two years. For the second time this year a publicly traded company, Shanda, following on the heels of Sohu that launched Changyou.com, is further spinning off into a new public company one of its game divisions. We anticipate more IPOs of smaller Chinese online game operators too, and welcome them as they enable greater transparency into the financials of these companies.

Niko hopes that the comments by Secretary of the Treasury Timothy Geithner in the first weeks of the new administration about the Chinese currency exchange value, and the new import tariffs on tires from China, and perhaps other US-China discussions will not harm US video game companies who may suffer a backlash from China for these events. Already US companies have a difficult time penetrating China's market and there may be some trade issues that might deserve attention by the US Trade Representative. Lets hope that US-China trade disputes do not become a norm, as that will be bad for US video game industry companies who want to do business there.

In a big move for Dell, they opened a flagship store in Shanghai. Niko's latest Chinese Gamers Study showed that 84% of our survey sample of 1,850 gamers in 20 Chinese cities has a PC at home - a huge number. Many of them hope to replace their ageing PCs after a couple years of use. There is a push to buy branded products, and even though the Green Dam software issue was diffused this summer, many customers want to make sure that their PC will run properly. Gaming is a leading application for home PCs and Dell has a line of computers to serve the gaming segment.