Share prices of Chinese video game companies rallied on Wednesday after investors seized on signs that the government was reconsidering proposed regulations on gaming.

Since the weekend, regulators have tried to calm the market after shares of the two largest video game companies, Tencent and Netease, plummeted on Friday.

When trading resumed after the four-day holiday weekend in Hong Kong, Tencent rose about 4 percent and Netease jumped 12 percent, recouping some of its losses. Shares of the companies rose again on Thursday.

The events of recent days underscore the forces of tug-of-war in Chinese policymaking. The country’s top leaders have acknowledged that they need to stabilize the economy, which has been slow to recover from a virtual lockdown during the Covid pandemic. But tight government control over how companies do business continues to inject uncertainty into markets.

China’s National Press and Publication Administration, which licenses game publishers and oversees the industry, on Friday unveiled a proposal aimed at effectively reducing how much people spend on games. The plan took the industry by surprise and investors dumped tens of billions of dollars in company stock.

The regulator issued a statement on Saturday emphasizing that the draft rules aim to “promote the prosperity and healthy development of the industry” and said it was “listening to more opinions in a comprehensive manner and improving regulations and provisions.”

Then on Monday, the agency announced that it had licensed about 100 new games, after licensing another 40 on Friday. And a semi-official association affiliated with the agency said the additional game approvals were “positive signs” that the agency supported the industry.

The new regulations would limit the amount of money users could spend within games on things like upgrading character traits or purchasing virtual weapons or other things used by characters. It would also ban rewards that companies use to entice players to return. The proposal did not specify a spending limit.

“The draft regulation would inevitably lead to changes in current practices and possible short-term revenue losses,” said Xiao Lei, an assistant professor at the University of Hong Kong’s business school.

But, he added, its impact could be less than feared, as authorities could adjust or eliminate some of the provisions. Consumer demand for games and the social interactions they enable will not be affected, she added.

Analysts at Japanese bank Nomura said in a report Tuesday that the rules could “significantly harm” the ability of Chinese video game companies to make money.

The “firefighting measures” the government has implemented since Friday, Nomura added, will ease investor concerns but will not remove the shadow it has cast over China’s video game sector.

The industry is still recovering from restrictions first imposed in 2019 aimed at what the government deemed an addiction to online gaming among minors, as well as a broader crackdown on technology companies. Regulators also hindered publishers by not issuing new game licenses for an eight-month period ending in April 2022.

Tencent and Netease have downplayed the impact of the proposed regulations.

The draft rules did not “fundamentally change the game’s business model, operational pace or other key elements,” Vigo Zhang, vice president of Tencent Games, said in a statement on Friday. Netease said over the weekend that the proposal would not have any material impact on its business and added that it would share its views with authorities.

The regulatory agency said it would accept comments on the proposal until Jan. 22.

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