China's two online game regulators - the Ministry of Culture and the General Administration of Press and Publications (GAPP) - have been struggling for control of the online game sector. The two regulators separately announced that they were drafting new rules governing the sector, but the Ministry of Culture seems to have beaten GAPP to the punch by releasing the Provisional Regulations for the Administration of Online Games on 3 June 2010 ("Online Game Regulations").
When the Ministry of Culture initially gained the upper hand following a State Council decree that appointed the Ministry of Culture as the supreme regulator of the sector, GAPP hit back with a notice of its own requiring all online operators to get an operating licence from GAPP as well as three certificates: the copyright approval certificate, the game examination certificate and the online game publication certificate. GAPP also banned all foreign investment in online gaming, a ban that remains in effect to this day.
The rivalry between the two authorities came to a head in 2009 when the most popular internet game in China, the World of Warcraft, shifted operators and went through an upgrade. Both agencies claimed to have final approval powers and their conflict resulted in the game being ordered to go off-line for five months.
The Online Game Regulations consolidate the Ministry of Culture's scattered regulations on online games and virtual money operations and introduce a few new measures, most notably the requirement that online gamers register with their real names.
Market entry for operators
The Online Game Regulations that will be implemented from 1 August confirm that an online game operator must have registered capital of at least RMB 10 million and obtain an internet culture operating licence from the Ministry of Culture.
Game imports and approvals
Only an online game operator in China which holds the exclusive licence to an online game may import that game into China. While the contents of all imported games must be approved by the Ministry of Culture before the game may be played online, domestic games solely need to be filed for the record with the Ministry of Culture within 30 days after the game is placed online. The Online Game Regulations provide that if online game publications have been approved by other relevant departments (read: GAPP), then the Ministry of Culture will not conduct any further approval and the game may be uploaded on the internet.
- Players are required to register with their real name and provide their identification documentation. This move has been criticised in China, partly because players want to ensure anonymity and some freedom of speech, but mainly because they fear incompetent or bad-faith management of the information which will lead to commercial use of their identity.
- It is prohibited for online games to force confrontations between players.
- Pop-up advertisements that lure players to buy game products with real or virtual currency are also prohibited.
- The Online Game Regulations restate the types of content that are prohibited in online games. This is the usual list of politically and culturally sensitive content that is applicable to all web content in China. Online game operators must establish a self-censorship mechanism and have a dedicated department and personnel for this purpose.
A year ago, the Ministry of Culture published jointly with the Ministry of Commerce China's first regulations on virtual currency transactions. Virtual currency may only be used to purchase services and products provided by the online service provider that issues the currency and not for the purchase of real-world goods or to trade goods and services of other entities. The purchase records of online gamers must be kept for at least 180 days from their last purchase.
Protection of minors
Virtual currency service providers may not provide virtual currency transaction services to minors. With some reports putting online addiction by China's youth at 14%, it is no surprise that the Online Game Regulations require online game providers to adopt measures to prevent underage gamers becoming addicted to online games by limiting their playing time. Minors must not be exposed to "content that is unsuitable for them".
The Provisional Regulations impose stricter controls on China's online game operators and its 100 million fervent online gamers. It remains to be seen whether the clarity that the Provisional Regulations provide may be blurred when GAPP finally reveals its own regulations governing this sector.
The views set out in this publication are based on our experience as international counsel representing clients in their business activities in China. As is the case for all international law firms licensed in China, we are authorised to provide information concerning the effect of the Chinese legal environment. However, we are not admitted to practice Chinese law and so are unable to issue opinions on matters of Chinese law. The content of this article is intended to provide a general guide to the subject matter.
 The Notice on Strengthening the Administration of Virtual Currency in Online Games (summarised in our alert entitled China regulates virtual currency transactions).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.