According to the State Admin of Industry and Commerce (SAIC), at the end of 2010 China had approximately 130,000 registered cyber cafes, down 100,000 during the past five years due to closures of unlicensed cafés. Niko Partners has tracked Internet cafés, the PCs within them, usage of cafés, and regulations monitoring them since 2003. In April 2010 our estimate was 139,000 licensed cafés, with 20-30,000 more unlicensed. In recent months Niko has come to understand that Internet café usage is declining as a direct effect of someone purchasing a home PC. Therefore the reduced number of licensed cafés is expected. Our 2011 Annual Review & Five-Year Forecast Report, due at the end of April 2011, will provide analysis on the declining demand for Internet cafés in China and why that will not be a problem for the games industry.

Tencent acquired Riot Games for $400 million. This is meaningful because it is Tencent's second acquisition and third presence in the US, and it demonstrates the company's meaningful attempt to acquire talent and knowledge to export their online games dominance from China to the United States. The US companies, on balance, are still behind Asian game companies with regard to online games, distribution and technologies. Tencent's growing presence in the US is not unique for Chinese online game companies as Shanda, Snailgame, and Perfect World are all here too and more are surely on the way. Not much of a reverse tide to China from the US though.

Based on evidence that the Chinese online games market is experiencing slowing growth (as Niko has said in our forecasts of our past several reports on the market), and because there is a declining number of Chinese young people who have been devoted to online games entertainment, the best of times is behind us according to China Business News. Niko agrees that the growth rates are slowing and that competition is increasing, talent is still scarce, and the market is evolving. The game companies may be wise to recognize that it is now a demand-based market rather than a supply-based market of days gone by. Gamers have well documented preferences and behaviors that if capitalized on could perk up the growth in the future. But with distracting options such as social networking and mobile games, the online games segment may need to hunker down to return to lofty growth rates experienced in past years.

Asiasoft is promoting its @Gamer program in Singapore. The program rewards players with 10% cyber café hours, gaming vouchers, "extra leveling experience points, increased drop rates, exclusive in-game rewards, and special access to locked in-game maps when playing at a cyber cafe." All players have to do is sign up for the program and play within Asiasoft's @Cafe network.

The economy saw the strongest growth in the fourth quarter of 2010.  While GDP rose from 6.9 percent in the fourth quarter, the central bank still has concerns "about buildup of inflationary pressure that prompted it to raise interest rates on Friday." The bank has not raised its rates in nearly two years. Increases were seen all around:Infrastructure is growing due to foreign investment: "Japan has already pledged about $53 billion over 15 years and is funding a metro line for Jakarta." Car sales increased as well up to 57 percent in 2010. Government expenditure and exports accelerated. While Indonesia does not have the strongest economic reforms in Asia, "investors are piling in because it has a massive domestic consumer market and the president is pressing economic reform."