- China is projected to become the second biggest esports market after the US if it maintains current growth rates.
- In a significant move for investors, the Chinese government has officially recognized esports in a professional capacity.
- Foreign investors should take note of any regulatory easing as major Chinese cities vie to become the next global esports hub.
The Chinese government made headlines in February this year when they officially recognized the roles of “esports professionals” and “esports operators” as official job titles in the country. Esports-related majors have also been added to the roster at a number of national colleges.
According to industry reports compiled by esports analyst Newzoo and consultants PwC, China will soon overtake South Korea as the second largest esports market after the US in 2019. The industry is expected to continue to grow at a compound annual rate of 21 percent until 2023.
In 2019, China will account for US$210 million (RMB 862 million) in revenue compared with US$409.1 million (RMB1.6 billion) in the US.
Chinese cities are competing to become the next esports hub
In November 2017, Hangzhou, the capital of Zhejiang Province in east China, created a US$280 million, 39.4 million-square-foot, officially designated “esports town”. LGD Gaming and Allied Gaming, two of China’s most successful esports franchises, own a joint office in the town and LGD’s League of Legends Team is based there.
Hangzhou expects to attract over 10,000 new esports professionals and earn US$140 million in tax revenue. The city also plans to build 14 new facilities by 2022 and is willing to invest up to US$2.22 billion to reach its goal.
In 2022, Hangzhou will host the Asian Games where esports is expected to be an official medal event. Currently, six cities on the mainland – Hangzhou, Chongqing, Shanghai, Xian, Sanya, and Haikou – are competing to become the next major esports hub. Chongqing most recently held the Alisports WESG grand tournament in March of 2019 with a total cash prize pool of US$2.5 million.
Changing regulatory policies, new subsidies
While the government appears to be more supportive of the esports industry, it is unclear how much direct investment it is willing to commit. Private capital and city governments appear to be the most invested in the growth of this industry, through hosting tournaments or establishing infrastructure.
Moreover, it is no secret that Beijing has traditionally viewed online gaming as counterproductive to national health and communist values. The government’s relationship with the video game industry has long been tainted by the infamous 15-year “console ban” from 2000 to 2015 that drove local gamers to PC and mobile phone gaming.
Just last year, the government issued an eight-month freeze on new video games due to concerns of growing “internet addiction” among young gamers. After lifting the freeze, authorities pressured local companies like Tencent to limit the amount of time young people would be allowed to play their games.
However, recent developments show a change in Beijing’s traditional stance.
It is estimated that well over US$1 million has been spent in subsidies on local gaming tournaments in China. Several projects have been implemented that offer cash handouts for local gaming clubs to keep them on par with international competition.
The government seems increasingly encouraging of “offline” esports options like internet LAN cafes and gaming summer camps for children. Much of their concern seems to revolve around children spending too much time online.
Those wishing to invest in offline competitive gaming options would do well to keep their eyes on China as they seem to be one of the only countries looking to expand in this area.
All signs therefore show the esports market in China to be set on a trajectory for rapid growth. Businesses are advised to seek help from local experts to stay abreast of changing regulations and the opening of new market segments. Policies change quickly in China and the esports industry doubtless has a few more surprises left for us yet.
China Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Dalian, Beijing, Shanghai, Guangzhou, Shenzhen, and Hong Kong. Readers may write to firstname.lastname@example.org for more support on doing business in China.