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10/12/2009
08:18 PM
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China Bans Foreign Investment In Online Games

Foreign companies will no longer be allowed to invest in or control gaming companies in China, according to regulations issued over the weekend.

Tightening its grip on online activities, China has banned foreign investment in online games in China.

The news was announced on Saturday in a circular released by the General Administration of Press and Publication (GAPP) and the National Copyright Administration, according to a report published by Xinhua, the Chinese government's news agency.

China's national "anti-pornography" Working Group Office also participated in the release. The regulations aim to control illegal and unhealthy content, a longstanding concern of Chinese authorities.

The rules forbid foreign investors from owning, joining or controlling online games in China. They also prohibit foreign control through indirect means, either through contractual agreements or through provision of technical support, user registration, account management or game networking.

U.S. gaming companies that wish to operate in China will have to license their games to a partner based in China, as Blizzard has done.

In April, Blizzard, the creator of the World of Warcraft, said that it had extended its existing partnership with NetEase.com by three years, to allow the China-based company to continue to operate the World of Warcraft for Chinese users.

The rules also make it clear that any domestic game operator must be licensed by the state.

According to Xinhua, GAPP had investigated some 200 online gaming companies as of last Thursday and shut down 45 of them for failing to secure permission to operate in the country.

The Office of the U.S. Trade Representative did not immediately respond to a request for comment.

The ban on foreign investment follows related efforts by the Chinese government to control online content.

In January, China's State Council Information Office and six other government ministries criticized Internet search engines, including Baidu and Google, for threatening the health of Chinese citizens with pornography and vulgarity.

In June, China's Ministry of Health said it would stop porn sites that masquerade as health Web sites. That same month, protests from the U.S. government, tech trade groups, and Chinese citizens pressured Chinese authorities to delay and then scrap the July 1 deadline to include filtering software known as Green Dam with every PC sold in the country.

Also in June, China's Ministry of Culture and Ministry of Commerce issued a joint release banning the use of virtual currencies sold by game operators for trading in real goods or services.

In September, advocacy groups and news sites reported that China has started requiring ISPs to install software called Blue Dam for network-level censorship and surveillance.

Some observers expect a relaxation of Chinese government efforts to control online content in in the country following the sensitive 60th birthday of the People's Republic of China, which occurred on October 1. But Saturday's announcement suggests such predictions may not be accurate.

InformationWeek has published an in-depth report on Dell's $3.9 billion buy of Perot Systems. Download the report here (registration required).

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