China Moves To Ban Foreign Video Games; NTES, ATVI Slide

The video gaming sector is grappling with China’s new, stricter interpretation of a ban on the involvement of foreign companies in the sector in China. In particular, the move could force Netease (NTES) to take its version of World of Warcraft offline, according to research firm Wedge MKI. That would also have negative implications for Activision (ATVI), which licenses the game to Netease.

In a research note, Wedge observes that China’s General Administration of Press and Publications published a notice “reiterating and more strictly interpreting” the ban on foreign investment in the sector. “Our channel checks indicate that regulatory authorities are upset with Netease for opening up the game without approval,” Wedge writes. “We understand that executives of gaming companies have been called with urgency to Beijing for meetings with regulators.”

The Financial Times reports that the notice was posted on the GAPP web site on Saturday.

Wedge contends that the government has begun to ID unapproved game, issues some suspension notices; they say that according to one report 45 foreign games have already been required to cease operation.

NTES today is down $3.78, or 9.3%, to $36.73. ATVI is down 30 cents, or 2.4%, to $12.36.