Oct. 12 – The General Administration of Press and Publication (GAPP) and the National Copyright Administration announced that foreign investment in China’s online gaming industry is now banned in any form.

According to the circular, foreign businesses are prohibited from investing  in online gaming operations through wholly owned enterprises, joint ventures and cooperatives. The new directive extends to suspending foreign firms from indirectly influencing local gaming firms through agreements or technology support.

China’s online gaming industry is big business with forecast revenues reaching US$3.65 billion for 2009. Estimates by video game market consultancy firm, Niko Partners, say that there will be 64.9 million online gamers by the year’s end who will spend an average of US$52 each. So it is no surprise that the government wants to keep the industry tightly regulated for its significant financial value and more importantly cultural influence on millions of Chinese gamers.

Most Chinese users favor online games that do not require a subscription and PC offline games. The most popular online game in the country is the World of Warcraft, an online multiplayer online role playing game developed by American company Blizzard Entertainment. The online gaming industry is regulated by the GAAP with the agency granting permits and approving gaming content.

In July, a planned joint venture between Blizzard Entertainment and Chinese operator NetEase was questioned by the agency. The JV would have allowed  Blizzard’s other  popular games Starcraft II, Warcraft III: Reign of Chaos, Warcraft III: The Frozen Throne to be distributed in China by NetEase.

The new circular also mentioned restrictions on the local online game businesses  saying that no organization or individual could run online game businesses without GAPP approval. Recently, 45 overseas online games were banned by the agency after investigation.