China's video game market returns to double digit growth in 2023 but overseas expansion slows

China's video game industry achieved double-digit growth this year after a small decline in 2022, but overseas revenue fell, according to the country's semi-official gaming industry association.

China's video game sales increased 14 per cent this year to 303 billion yuan (US$42.7 billion), marking the highest yearly sales since the data became available in 2003, according to a report released on Friday by the Game Publishing Committee of the China Audio-Video and Digital Publishing Association, at its annual conference in Guangzhou.

In 2022, total gaming industry revenue slumped 10.3 per cent year on year due to the pressure of economic headwinds, regulatory scrutiny and slower user growth, according to the report for 2022, released by the same association in January.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

The total number of gamers in the country inched up 0.6 per cent to 668 million in 2023. However, the association, which attributed the overall growth to factors such as the post-Covid recovery of consumer spending and the increasing number of new titles launched in the year, said the industry still needs to build up more confidence.

The industry is slowly recovering after a prolonged regulatory crackdown that began in late 2021.

The National Press and Publication Administration, in charge of licensing video games in the country, resumed a more normal pace of granting new licences this year, with a total of 873 approvals issued for new domestic titles in the first 11 months, up from 755 in 2021 and 512 in 2022.

The country's biggest video gaming companies also saw their revenue recover this year. Tencent Holdings, the world's largest video game company by revenue, reported an 11 per cent jump in sales for the first three quarters this year, driven by growth in advertising and game sales, while rival NetEase's revenue increased 7 per cent in the same period.

Notably, the overseas market - seen by the major players as a new opportunity for growth - recorded a drop in 2023, with overseas sales of China-developed titles down 5.7 per cent year on year to US$163.7 billion.

Factors such as a "turbulent international situation, fierce market competition, and changes in privacy policies" increased the difficulty and operating costs of overseas expansion, the report said.

People visit a PlayStation booth at Bilibili World 2023, an exhibition of animation, comics and games, in Shanghai July 21, 2023. Photo: AFP alt=People visit a PlayStation booth at Bilibili World 2023, an exhibition of animation, comics and games, in Shanghai July 21, 2023. Photo: AFP>

The US remains the top destination for overseas expansion of Chinese mobile gaming companies, accounting for 32.5 per cent of their overseas revenue, followed by Japan and South Korea with 18.9 per cent and 8.2 per cent, respectively.

The report said mini games, which have drawn heavy investment from Tencent on its WeChat social media platform and ByteDance via its TikTok short video app, was a promising sector with a year-on-year growth of 300 per cent.

Despite the overseas revenue drop, some foreign gaming giants reiterated the importance of the Chinese market to international growth.

"Helping Chinese games reach the global stage through the PlayStation platform is one of our long-term business goals," Tatsuo Eguchi, president of Sony Interactive Entertainment (Shanghai) Co, said at the association's conference on Friday, adding that the Japanese giant cooperated with more than 400 domestic gaming companies.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2023. South China Morning Post Publishers Ltd. All rights reserved.