Chinese Economics Thread

[ZeEa5KPul]

Just goes to show that there are idiot decision makers out of touch with how things really work in every government.

No, the regulators know exactly what they're doing by taking the sledgehammer to gacha trash like NetEase. If anything, it's disappointing to see them back down.

The idiots here are investors. The Chinese government has hung up a dozen signs telling them where and where not to invest, they insist on investing in things the government wants to discourage. They deserve to lose their money.

 

[Blitzo]

No, the regulators know exactly what they're doing by taking the sledgehammer to gacha trash like NetEase. If anything, it's disappointing to see them back down.

The idiots here are investors. The Chinese government has hung up a dozen signs telling them where and where not to invest, they insist on investing in things the government wants to discourage. They deserve to lose their money.

I would say that at this stage the proposed regulations are still in public consultation, and like it or not there are substantial amounts of money tied up in these ventures, and some of the companies are actually fairly successful overseas as a form of cultural export, so I could see the government being willing to see how things go.

However in the long run, video games that promote constant engagement, "games as a service," gacha and microtransactions are ultimately a drain on the video gaming industry, and for that industry transitioning to a more sustainable AAA and indie single purchase +/- reasonable DLC model would be better, but China's industry has yet to be populated by substantial numbers of mature developers.

Finding a balance between the more profitable (but less socially desirable) GaaS/gacha/microtransaction model, and transitioning to single purchase would be ideal. But internationally I also feel like the cat is out of the bag already, with the most successful and profitable games pursuing some form of the first model.

 

[TK3600]

I would say that at this stage the proposed regulations are still in public consultation, and like it or not there are substantial amounts of money tied up in these ventures, and some of the companies are actually fairly successful overseas as a form of cultural export, so I could see the government being willing to see how things go.

However in the long run, video games that promote constant engagement, "games as a service," gacha and microtransactions are ultimately a drain on the video gaming industry, and for that industry transitioning to a more sustainable AAA and indie single purchase +/- reasonable DLC model would be better, but China's industry has yet to be populated by substantial numbers of mature developers.

Finding a balance between the more profitable (but less socially desirable) GaaS/gacha/microtransaction model, and transitioning to single purchase would be ideal. But internationally I also feel like the cat is out of the bag already, with the most successful and profitable games pursuing some form of the first model.

I do see the point though. Ideally games a better this way even at cost of profit. Speaking from interest of nation. But they must be careful to not harm competitiveness. No point cripple domestic games so foriegn games win. Also make sure domestic games exported do what they want. Their society be damned.

 

[ZeEa5KPul]

But internationally I also feel like the cat is out of the bag already, with the most successful and profitable games pursuing some form of the first model.

That's fine, China doesn't need to chase every single penny. US health insurance and pharmaceutical companies are very profitable, but the US "healthcare" system is nothing China should emulate.

It's better that gacha/pay2win be outlawed entirely in China - which these regulations don't propose, they just have limits for minors - and companies like Tencent and NetEase get it through their heads that they won't be able to make money this way. Just like Ant learned they can't make money through online loansharking.

 

[TK3600]

That's fine, China doesn't need to chase every single penny. US health insurance and pharmaceutical companies are very profitable, but the US "healthcare" system is nothing China should emulate.

It's better that gacha/pay2win be outlawed entirely in China - which these regulations don't propose, they just have limits for minors - and companies like Tencent and NetEase get it through their heads that they won't be able to make money this way. Just like Ant learned they can't make money through online loansharking.

See my above reply. Balancing competitiveness is key. Dont want to bash domestic industry without balance competiveness. Otherwise market is taken by foriegners.

 

[ZeEa5KPul]

See my above reply. Balancing competitiveness is key. Dont want to bash domestic industry without balance competiveness. Otherwise market is taken by foriegners.

The regulations will apply to all games, foreign and domestic, in China. Foreign developers won't have an unfair advantage in the Chinese market.

One interesting idea is that these regulations would only apply to Tencent, NetEase, etc. games in China. For versions of the games outside China, they can still have the exploitative mechanisms like microtransactions. Something like the TikTok/Douyin split.

 

[Blitzo]

That's fine, China doesn't need to chase every single penny. US health insurance and pharmaceutical companies are very profitable, but the US "healthcare" system is nothing China should emulate.

It's better that gacha/pay2win be outlawed entirely in China - which these regulations don't propose, they just have limits for minors - and companies like Tencent and NetEase get it through their heads that they won't be able to make money this way. Just like Ant learned they can't make money through online loansharking.

What I meant by the cat being out of the bag internationally, is that being financially dominating/successful does lend itself to a degree to push out competitors, and capturing the market means greater ability to invest down the line into more useful technologies relevant to the industry.

Being unable to compete at all overseas (even if the modality itself is not ideal, speaking as someone who prefers old school gaming monetization models), means losing an entire market by default.


I suspect what will end up happening is that some regulations will be put in, but not enough to cripple the industry domestically which is where lots of the revenue for these games are from. There is also a soft power element at play, where it is unironically the case that games like Genshin Impact are able to present cultural exposure to a demographic that no other Chinese media product is really able to reach, which I expect companies like mihoyo to present a case for to the government.

 

[TK3600]

The regulations will apply to all games, foreign and domestic, in China. Foreign developers won't have an unfair advantage in the Chinese market.

One interesting idea is that these regulations would only apply to Tencent, NetEase, etc. games in China. For versions of the games outside China, they can still have the exploitative mechanisms like microtransactions. Something like the TikTok/Douyin split.

Lets be real, until recently, Chinese games are crap. At equal restriction foriegn games were better. Games by net ease are still crap thats why they use daily log in as crutch. Better to do it one step a time so they are pressured to improve. Not instant collapse.

 

[Biscuits]

Imo they're just 6-10 months early on doing a big initiative like this.

Everything points towards the big AAA titles in the works now going to end up as big successes.

With that renewed cultural phenomenon much like what happened for Elden Ring and God of War, that will give the best possible starting conditions for a grand offensive against microtransaction models.

 

[pokepara]

You're not wrong, but I suspect there's also a mentality issue at play here. I read a lot of Indian media and everyone agrees that Indian railways are substantially underfunded, but that is because tickets have to be very cheap for the vast poor masses to afford them. Raising the ticket prices would allow for greater investments but many can't afford any other transportation option (except buses, which are also underutilised). The Indian middle classes are increasingly opting for a US-style bargain: cars in the city and airplanes for longer distance travel.

So it's a chicken-and-egg problem. China solved this by raising its savings rate to nose-bleed levels and then that allowed the investment rate to go up to 40% of GDP if not higher. You could self-finance all that investment without borrowing from abroad (current account deficits).

All this requires a significant amount of state capacity and financial repression: basically subsidising deposit growth to Chinese households by having high interest rates and then channelning that excess savings cheaply to various infrastructure firms, often controlled by the state. It's not easy to pull off.

That model works uniquely well in China but I suspect it is not so easy to replicate in India, let alone the West.

I posted this on the last page, but that 40% investment of GDP figure is likely incorrect due to China's legacy use of MPS to manage their economy. This comes from the soviet model and is calculated on material production (excludes things like services and transportation). When they joined the western economic system, they did a very low multiplication to convert to a rough approximation GDP that likely underestimates consumption.

Conclusion:

Most controversially, perhaps, we also conclude that China’s GDP is under-reported by an amount largely equal to household consumption outside of retail sales. If we had to ballpark it, we would say China’s household consumption is 50-55% of GDP, investment is 30-34% of GDP and total GDP needs to be grossed up by 25-40%.

This has many implications. One is that China’s economy is not nearly as unbalanced as conventional wisdom believes – it is merely a peer of its Asian neighbors Japan and Korea. It explains why the government only seems to give lip service to increasing demand while all policies somehow favor supply. It explains how China has avoided the dire consequences of running such an unbalanced economy for so long – mostly because it hasn’t been.

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I question that HSR couldn't happen in the West and India. It originated in Europe after all! Maybe India couldn't follow the same path China did, but what about Indonesia, Laos and Sri Lanka? How did Japan do it?