Chinese game changers? Potential risks associated with Chinese investments in the global video game industry

Summary

This is the first report, to our knowledge, to provide a comprehensive overview of the potential risks associated with Chinese investments in the global video game industry across the political, economic and cultural domains. This study aims to increase knowledge about the global gaming industry’s exposure to Chinese gaming companies and the potential risks that could arise.

The report uses Sweden as an in-depth case study to examine the Chinese presence in the gaming industry and the potential risks associated with Chinese investments in that industry. While it is possible that these risks may also be applicable to nations other than Sweden, it cannot be ruled out that other countries may face additional risks or that the severity of the risks we discuss might vary.

In the past decade, Tencent and NetEase have emerged as key players in the international games industry. Offshore investments have become increasingly important for Tencent and NetEase due to uncertainty in the Chinese domestic market and a weakening environment for large tech companies. Like many other significant tech companies, they have invested in or purchased foreign games studios, and many international Chinese-owned studios have expressed satisfaction over their partnership with Chinese investors.

The formal ties between companies such as Tencent and NetEase and the Chinese government should not be underestimated. While it is difficult to determine how extensive these ties are, the Chinese government has an interest in Chinese game companies’ expanding their global influence; for example, the CCP has named video games one of the export categories aimed at promoting Chinese culture by “telling China’s story well”.

Chinese game companies could find themselves in a difficult position where they must balance commercial interests with government interference. Chinese gaming firms have occasionally promoted the interests of the Chinese state, such as by amplifying the Chinese government’s notions about video game addiction and promising to restrict “politically harmful” content. Compliance with Chinese official ideology has become customary for Chinese gaming businesses. At the same time, however, these corporations are well aware that similar behaviour in upholding Chinese state ideals will not be tolerated in most other countries, particularly in Europe where Tencent has declared a desire to boost investment.

At present, our perception is that the motivations for Chinese game companies increased international investments are mostly commercial. However, as China’s political environment becomes increasingly authoritarian, there is a risk that these companies’ commercial interests will be overshadowed by the Chinese government’s political interests. Furthermore, a lack of transparency and official statistics makes it difficult to determine the size of Chinese investments in the global video game industry. To address these issues, we make the following recommendations:

• Increase information sharing about the size, scope and potential effects of Chinese investments both between countries and between various entities in the gaming sector.
• Increase guidance from government agencies worldwide on how games companies should respond to investment proposals from Chinese companies. As the gaming industry is unique in straddling the technical and cultural worlds, incorporating various elements from frontier technologies to younger generations’ worldviews that could be exploited and influenced, such guidance should not simply be a repeat of existing regulation of Chinese investments in general.
• Strengthen knowledge in the gaming industry, as well as among government agencies, about how data is collected and accessed through games developed by Chinese-owned companies, and what the possible consequences of such data gathering might be for the integrity of individuals.
• Increase international gaming companies’ knowledge and understanding of China’s political system, for example in terms of the role of the Chinese government and the influence it has on the private sector in China, and what this means in practice for international gaming companies that collaborate with or accept investments from Chinese companies.