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A possible slowdown of Chinese GDP growth as well
as issuance of new government controls in the banking sector to perhaps fend
off a bubble that could burst were big news this week, and were a major
contributor to a decline in US stock prices.
This plus the continuing story of Google's decision on whether to pull out of China's market
were bound to put a sour taste in the mouths of US executives tasked with
global expansion to China. But, we would
caution any game industry executives who are getting cold feet to think
intently about the relevance of these two news items for their own companies
and the Chinese game industry as a whole, particularly the online games
segment.
The Google story should not impact video game
industry companies though, because the story there is probably one of a company
whose slogan is "don't be evil" not wanting to be part of a Chinese government
effort to identify and punish dissents who may have Google accounts. Niko
learned that Google's Taiwan team reverse hacked servers to find out that it
was allegedly the Chinese government hacking them in order to allegedly
identify some users' accounts. The stated reason for pulling out of China is
that they don't want to deal with the censorship issues anymore, but as those
have not changed recently it is likely that the real reason (Niko guessing
here) is that they choose not to be part of that alleged government ploy.
Another news story this week was the opening of
GAPP's China Games Industry Association Annual Summit. There was great anticipation ahead of the summit
because of the heightened tension between GAPP and Ministry of Culture for
regulatory authority over online (and other segments) games. While the statements
of Mr. Sun Shou Shan, Vice Minister of GAPP, led some observers to conclude
that the market will become more hostile to foreign companies and foreign
investment, in practice that probably will not happen. The GAPP stated that
2009 online game revenue reached 25.62 billion RMB ($3.75 B), whereas MOC
stated it had reached 25.8 billion RMB ($3.77 B) a week earlier. Niko is
building our 2009 market model and forecast now, but in September 2009 we
forecast that revenue would reach 25.0 billion RMB ($3.65 B) lowering our
previous forecast made in April 2009 from 26.0 billion RMB ($3.8 B) for the
full year.
The fact that our forecast was very close is
exciting news as analysts, but the fact that the market is still growing
rapidly should be exciting news for all game companies. Chinese online game
companies have set their sites on international markets, but when they arrive
they might find that they cannot adequately compete against global giants
because they have been shielded from competing against them at home. In addition, the WTO will frown upon Chinese
companies expanding to countries without trade restrictions for games while US and other foreign firms run
into road blocks in regulations when trying to enter or expand in China's
market.
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