Marketing Case
Global Competitiveness of China’s Game Industry:
From Japan’s Perspective
2025 Volume 45 Issue 2 Pages 165-171
Details
2025 Volume 45 Issue 2 Pages 165-171
China’s game market emerged in the early 1980s, following the country’s reform and opening-up initiatives, and has since grown rapidly under supportive government policies and socioeconomic developments. Today, China’s game market stands as one of the largest game markets globally, alongside the United States. Chinese companies entered the game industry in the early 2000s, swiftly establishing global competitiveness, particularly in the mobile games sector, and began expanding internationally in the late 2010s. This article explores the evolution of China’s game industry by first summarizing the role of governmental industrial policies and tracing the sector’s historical development. A qualitative approach is employed to analyze the key drivers behind the global competitiveness of Chinese game companies, using a macro, meso, and micro framework with insights from Japan’s perspective. The paper concludes by discussing the future prospects of China’s game industry, highlighting emerging trends, opportunities, and challenges as it continues to expand on a global scale.
中国ゲーム市場は改革開放後の1980年代初期にスタートし，政府の産業政策の動きと社会経済的コンテキストの中で独自の成長を遂げ，今や米国と並んで世界最大規模の市場となっている。そんな中で，中国企業は2000年代初期にゲーム産業に進出し，モバイルゲーム分野をメインに短期間でグローバル競争力を身につけ，2010年代後半から本格的なグローバル展開をはじめた。本稿はまず前半で中国政府の産業政策を整理した上で，中国ゲーム産業の発展の歴史を振り返る。後半では，定性的アプローチを用いながら，日本からみた中国ゲーム産業のグローバル競争力の形成要因についてマクロ，メゾ，ミクロの3つのレベルから考察する。そして最後に今後の展望について述べる。
Yoster’s outdoor exhibition at Tokyo Game Show 2024
Note. Photographed by the author (September 26, 2024)
This article presents a summary of the industrial policy and history of China’s game industry, followed by an analysis of the shaping of the global competitiveness of Chinese game companies from Japan’s perspective.
Since the 2010s, the global game market has been expanding rapidly. According to Famitsu Game Hakusho 2024 by Kadokawa ASCII Research Laboratories, the market size reached an all-time high of $210 billion in 2023, owing to the proliferation of smartphones and innovations in game development and internet technology. East Asia has the largest market size at ¥12.5 trillion, followed by North America at ¥8.2 trillion and Europe at ¥5.3 trillion. The share of mobile games has been increasing since the late 2000s, accounting for 59% by the end of 2023, much higher than the 22% for PC and 19% for console games. The share of mobile games is significantly high in East Asia, exceeding 70%, whereas it remains below 50% in Europe and North America. This disparity can be attributed to differences in gaming cultures and lifestyles across regions.
China’s game market emerged in the early 1980s and has since become the largest in the world, along with the USA. Chinese game companies entered the market in the early 2000s and have been expanding their global presence since the late 2010s. Although the overseas sales ratio of Chinese game companies (approximately 30% for Tencent, 60% for miHoYo) is lower than that of traditional game companies such as Nintendo and Sony (approximately 70–80%), they show robust competitiveness, particularly in the mobile game sector. According to Sensor Tower, 40 Chinese companies are currently among the world’s top 100 mobile game publishers (360 Kr Japan, 2024).
China’s game industrial policy is often metaphorically described by industry insiders as “stepping on the brake (regulation) and accelerator (promotion) at the same time”.
The Chinese government has long regarded the cultural industry as part of “ideological education”. Since 2000, the government has turned a corner toward promoting it as an industry, recognizing its important role in transforming the economic structure, expanding domestic demand, promoting employment, etc. (Nakamura, 2018). In May 2017, the national “13th Five-Year Plan” for cultural development and reform clearly noted that the transformation and upgrading of the animation and game industry should be accelerated. Based on these policies, over the past 20 years, local governments across the country have provided a variety of support measures to the game industry, including preferential loans, subsidies and incentives, tax breaks, the development of related infrastructure, and the development and absorption of human resources.
Moreover, the aspect of “ideological education” has always been a strong consideration. The production and distribution of games in China is under strict censorship and regulation. Games are not allowed to contain content that is anti-government, anti-Communist Party, endangers national unity, etc. Violence, gambling and sexual elements are also subject to strict censorship. Additionally, driven by strong public concern about the negative impact of gaming, particularly on minors, the Chinese government has on several occasions imposed strict regulations on the industry, which has played a major role in shaping the development of China’s game industry.
As Nakamura (2018) noted, China’s game market emerged in the early 1980s following the implementation of the reform and opening-up policy. Along with foreign films, TV dramas, and animations, game culture (comprising arcades and console games) was introduced primarily through Hong Kong and Taiwan and rapidly disseminated throughout the country. As a result, arcades proliferated across the country, and young people became avid consumers of foreign arcade games. With respect to console games, the majority of Chinese consumers were playing with counterfeit consoles manufactured by local companies, as legitimate foreign consoles were prohibitively expensive at that time. During this period, pirated versions of foreign games, particularly those from Japan and the USA, were pervasive and significantly influenced the development of game culture in China.
In the late 1990s, PCs began to make their way onto university campuses, with PC games gradually becoming more common. However, as of 2000, China’s PC penetration rate was only one-twentieth that of Japan, and PC and internet access remained limited. Consequently, many young people play PC games in internet cafes (Furuichi & Minegishi, 2021–2022).
(2) Ban on gaming (2000)During the 1980s and 1990s, China’s economy underwent significant changes in its economic and social structure, as it transitioned from a planned economy to a market economy. In this context, arcades were perceived as a potential source of social instability, particularly with regard to their impact on minors; this led to the Chinese government’s decision to ban gaming in 2000 (Notice No. 4 of the State Council). The operation of arcades and the opening of new arcades were strictly regulated, as was the manufacture and distribution of game consoles for the domestic market. As a result, many game arcades that had previously proliferated throughout the country were forced to cease operations, resulting in a significant contraction of the arcade game market. Console games were effectively eliminated from the public domain, except for those that continued to exist in underground markets supported by piracy and parallel imports until the ban was lifted in 2013.
Since then, China’s game market, which started relatively late, has been largely isolated from the global market and has undergone a distinct development process.
(3) Beginning of online games and the rise of local companies (~late 2010s)As the markets for arcade and console games contracted rapidly due to stringent government regulation, Chinese companies commenced a significant expansion into the online game sector; this coincided with the proliferation of broadband connections and indications of market growth after the year 2000 (Furuichi & Minegishi, 2021–2022). NetEase and Tencent commenced operations in the online game sector in 2001 and 2003, respectively, which was followed by a considerable number of local companies entering the market, introducing a variety of game genres and services. Chinese game companies experienced a period of rapid growth amid intense domestic competition.
The accelerated diffusion of low-cost smartphones and online payment systems since approximately 2010 has enabled China to assume a leading position in the global mobile game market (Nakamura, 2018). In this field, which has not yet attracted the attention of foreign game companies, Chinese companies have shifted their focus to mobile games, investing significantly in cutting-edge technologies such as big data and AI to increase their competitiveness. Furthermore, China’s market demonstrated a unique trend during this period, namely, the growth of casual games (mini games and HTML5 games). These games can be accessed directly within a web browser or on platforms such as WeChat, eliminating the need for additional installation. The majority were free since they monetized through advertisements. These features contributed to their rapid spread within the market. From the perspective of the supply side, the absence of platform-specific constraints has facilitated the dissemination of cross-platform business models among Chinese game companies.
(4) Online game license freezing and regulations for minors (2018~)In 2018, China implemented the most stringent regulatory measures in the world governing the game industry, including a freeze on new online game licenses (ISBN), more rigorous content restrictions, and time limits for minors. These regulations were introduced in an effort to address public concerns about gaming addiction.
In China, an ISBN is a prerequisite for the release of online games. The government temporarily suspended the approval of new game licenses for a period of nine months, beginning in March 2018. As a result, the number of licenses issued in 2019 decreased by two-thirds compared with that in 2017, and a similar decline was observed in 2021. This has caused significant disruption to the game industry. The regulations targeting minors under the age of 18 have focused primarily on real name registration, limiting play time and spending, and managing minors’ gaming habits, with the goal of reducing gaming addiction. To comply with government policies, Chinese game companies have implemented several measures to ensure that age-based restrictions are effectively applied. The regulations have been well received by parents. As indicated in the “2022 China Game Industry Minor Protection Progress Report” (China Audio-Video and Digital Publishing Association [CADPA]), over 70% of minors engaged in gaming for less than three hours per week, and 86% of parents expressed satisfaction with the current situation.
The implementation of these rigorous regulations has resulted in a notable decline in performance for Chinese game companies, leading to a precipitous decline in stock prices and the closure of numerous smaller companies. Consequently, Chinese companies have begun to expand their operations overseas, pursuing opportunities in international markets.
2. Accelerating overseas expansion (late 2010s~)The global expansion of Chinese game companies has involved a combination of M&As with well-known international developers and publishers, along with the cultivation of international markets. For instance, Tencent has made investments in more than 180 game companies across the world, including in Japan, the USA, and Europe. This has resulted in the establishment of a vast network and an expansion of its presence through its involvement in the development and distribution of numerous successful titles (Nikkei, 2022).
The initial overseas market for Chinese games was Vietnam in 2005 (Nakamura, 2018). During the 2010s, an increasing number of companies began targeting overseas markets. In particular, since the tightening of regulations in 2018, Chinese companies have accelerated their overseas expansion. Figure 1 illustrates the growth of overseas sales for Chinese game companies. There was a notable increase in overseas sales beginning in the mid-2010s, with a particularly rapid growth spurt since 2018. The growth was further accelerated by the global impact of the 2020 pandemic, which led to a significant increase in consumer spending as people around the world shifted to working and socializing from home. After 2022, there was a slight decline as the pandemic began to stabilize.
Overseas sales of Chinese game companies (million USD)
Note: Data are from “China’s game industry report” (CADPA) 2008–2024.
According to the CADPA, the main overseas markets for Chinese companies in 2023 were the USA (32.5%), Japan (18.9%), and South Korea (8.2%), followed by Germany, the UK, and Canada (9.5% combined). The USA and Japan have long been the top two markets for Chinese game companies, but their share is declining due to the diversification of export destinations (Zhang, 2023).
Japan has been a primary target for Chinese game companies from the outset, largely due to its early influence on China’s game market, its substantial market size, and its geographic and cultural proximity. In 2017, NetEase released “Knives Out,” MiHoYo released “Honkai Impact 3rd,” and Yostar released “Azur Lane” in Japan. Their success in the Japanese market prompted other game companies to accelerate their international expansion in 2018 and beyond. As detailed in the “2024 Japan Mobile Game Insight” by Sensor Tower, three Chinese games ranked among the top 10 in terms of revenue, and six were among the top 10 in terms of downloads, demonstrating strong competitiveness in the market.
In this section, we examine how Chinese game companies have achieved global competitiveness in such a short period of time. We use a macro-meso-micro framework that is widely used in fields such as sociology and management (Cunningham & O’Reilly, 2018). This framework allows us to analyze market phenomena or industrial development processes through three levels: the macro level (market trends, national policies, global trade systems, etc., that shape the overall context), the meso level (local policies, industrial activities, organizational networks, etc., that mediate between the macro and micro levels), and the micro level (entrepreneur and worker behavior, interpersonal interactions, individual firm decisions, etc., that act within the constraints or opportunities provided by the meso and macro levels). Importantly, the three levels are interrelated and influence each other. By focusing on the interactions among these levels, we can gain valuable insights into how China’s game industry has shaped its global competitiveness.
We obtained data from semi-structured interviews with eight industry insiders from China and Japan. Six of the eight interviews were conducted in person, and two were conducted online. Three of the interviewees were interviewed on two occasions. The interviews lasted between 20 minutes and 2 hours. All interviews were recorded with the interviewee’s prior consent. Further details are presented in Table 1. Furthermore, fieldwork was conducted at the Tokyo Game Show 2024 and at a social gathering for industry insiders held in Tokyo in September 2024.
Overview of interview participants
The main characteristics of China’s game market are its size and speed of change. Facing fierce competition in an enormous domestic market, Chinese game companies have acquired global-level financial and technological capabilities in a short period of time. In addition, the market is changing rapidly. Consumer values and lifestyles are changing at a dramatic pace, requiring game companies to be flexible and respond quickly. These aspects have an impact on the meso and micro levels, leading to the global competitiveness of Chinese companies, as we discuss below.
As previously mentioned, the Chinese government’s policy toward the game industry has swung between two directions: regulation and promotion. In particular, the 2000 and 2018 regulations dealt with a devastating blow to the domestic game industry. However, amidst severe economic stagnation during and following the COVID-19 pandemic, the Chinese government shifted back to supporting the game industry. In any case, it is undoubtedly an extremely unstable political environment, and this has increased the overseas orientation of Chinese companies. Interviewee A, who has been working in China’s game industry for more than 20 years, provided the following insight:
With no long-term vision in the domestic market, going overseas is a natural choice. Overseas markets are more mature, with a large number of users, and there is no strict censorship process like in China, so Chinese game companies are highly motivated [to go overseas]”.
Furthermore, while strictly regulating the domestic market, the government has been encouraging the game industry to expand overseas. Particularly in the era of Xi Jinping, under the slogan of “telling China’s story well”, the government has been urged to support the production and export of original cultural products using “China’s excellent traditional culture” and contemporary Chinese values. To promote exports, local governments have developed various support measures. For example, Gaoxin-qu in Chengdu announced incentives of up to RMB200,000 for companies that test new games for overseas markets in FY2023 and up to RMB5 million depending on sales when they are officially released overseas. Some Chinese companies are even using overseas expansion to build relationships with local governments. Interviewee A added:
The Chinese government is very keen on promoting Chinese culture to the world through the medium of games, so I understand that there are quite a few companies that use the keyword ‘overseas expansion’ to build good relationships with the government in order to do well in the domestic market. The government is happy if you say you want to export Chinese culture together. The idea is that if you make connections while getting overseas expansion funding, the government can handle whatever happens in China.
In line with the central government’s policy shift from ideological education to industrial promotion, hundreds of industrial bases have been established in China since 2002. This has led to the launch of numerous industry-government-academia projects centered on R&D, industrial incubation, human resource development, and international collaboration. As a result, a global competitive ecosystem for high-quality game production was established, and China became a major hub for game software development in the late 2000s (Nakamura, 2018).
The ecosystem for global expansion began to take shape around 2010. Chinese game companies frequently utilize the services of private companies to facilitate their overseas expansion. The Annual Game Industry Report in 2020 by Media Create (pp. 200–203) lists the main functions of these companies as follows: (1) disseminating information related to overseas expansion as media; (2) operating and activating communities through various online and offline study sessions, exchange meetings, group chats, etc.; and (3) providing matching services. The second author (Takahashi) has been supporting game companies from Japan and China in exporting to each other’s countries. To our knowledge, such initiatives by private companies are uncommon in Japan.
An agile business model is also a key factor in the global competitiveness of Chinese game companies. In a market environment where needs are rapidly changing and new trends are constantly emerging, Chinese game companies have developed an agile business model. They are attuned to user needs and respond promptly and adaptively, frequently implementing changes in response to user feedback even after the game has been launched. This approach is less prevalent among companies in other countries, as illustrated by interviewee B below. For example, KURO GAMES’s “Wuthering Waves” was developed with an “improvement and optimization plan” based on user feedback. The game became an enormous hit in Japan after 90% of the entire game was rebuilt within nine months of β testing. Nevertheless, this approach is regarded as controversial owing to the additional costs and workload involved.
Only Chinese companies do this. Because the market is so big that the profit from a single product is huge. The capacity to spend so much money is an important point. But at the same time, game companies are strangling themselves in a bad way. I think there are some companies that are taking it too easy.
Finally, Chinese game companies were early adopters of cross-platform business models. By allowing players to enjoy their favorite games across platforms, the business model is efficient because it prevents opportunity loss and reaches a wider player on a broad front. However, this business model requires financial and technological capabilities to enable cross-platform development while maintaining a certain level of quality, both of which Chinese companies have advantages over Japanese companies, according to Interviewees C and A:
Japan has been ahead in terms of technology and know-how, but in the last 10 years or so, I think Chinese game companies are starting to overtake Japan. It is the same as when the Japanese auto industry overtook the USA in the early postwar period.
Cross-platform development requires technology and capital, so you can’t do it without money and technology. The current challenge for Japanese companies is capital and technology, which makes a difference in the users they can reach. Everyone in the Japan’s game industry agrees that China is superior in game production, especially in technology. The visuals, graphics and cross-platform development can’t be done without technology.
The issue of industry structure is a key factor. In general, Japanese publishers are larger and more financially powerful than developers. Providing development funds to developers often significantly influences production, distribution, and promotion. However, in China’s game industry, which is a relatively new entrant and has undergone its own development process in a relatively short period of time, the two simply share roles and are generally on equal footing. Furthermore, the prevalence of casual games has also influenced the development of this business model.
3. Micro levelThe current leaders of China’s game industry are in their 30s and 40s. Since games were first introduced to the market in the early 1980s, the first generation to grow up with game culture was born in the mid-1970s or later, which means that they are now in their late 40 s. This generation was also the first to be exposed to PC online gaming as they entered college in the mid-1990s. Interviewee B offered the following description:
In China, there are a lot of people in their 30s and 40s who are really enthusiastic about anime and games. People in their 50s and older have no literacy or understanding of animation and games. They can’t make judgments based on anything other than numbers, and a lot of them are just in the business because it’s profitable. ... (About the difference with the Japanese business leaders) In my personal conclusion, it’s the hungry mind. The president of miHoYo came to Japan saying that he wanted to make a game that would be recognized by the Japanese. The same is true for Azur Lane. They wanted to see how well they would be received in Japan.
At the employee level, because of the business model and the fact that Chinese game companies are in the early stages of overseas expansion, they have acquired a wealth of experience and skills that also contribute to the competitiveness of Chinese companies, according to Interviewee A.
Employees are expected to grow in a very short period of time. First of all, there is a lot of work, and then there are many changes. Even if you do the same job, there are good changes and bad changes in the process of progress, but you gain a lot of different experiences. Also, in a positive sense, there is a place where you have to think deeply, or rather question common sense and precedent and start from scratch, so you have to think carefully and not just go through the motions. In that sense, I feel that working in a Chinese company gives employees three times more experience than working in a Japanese company.
As previously discussed, the drivers of China’s game industry’s global competitiveness can be divided into three levels: macro, meso, and micro. These three levels are interconnected. Macrolevel forces in the Chinese market, including market size, speed of change, and industrial policy, have led to the development of meso-level business models for Chinese game companies (agile and cross-platform) and the formation of an ecosystem for game production and overseas support. Additionally, both macro- and meso-level drivers have contributed to the development of a competitive workforce in China’s game industry. By examining these interactions, we were able to gain a broader perspective on how the Chinese game industry is acquiring global competitiveness.
On August 19, 2024, the PC offline game Black Myth: Wukong by Game Science became a significant milestone for the Chinese game industry. The game, which has been hailed as China’s first AAA game, sold 22.4 million units worldwide as of December 6, 2024, generating $1.1 billion in gross revenue, according to data from the video game analytics firm Video Game Insights. The success of this game has opened the door for Chinese companies to consider entering fields other than mobile games in the future. Another noteworthy aspect of this project is its potential to alter the perception of games among Chinese policy-makers and the general public, ultimately leading to more rational industry policies, as interviewee F observed. According to F, “the biggest problem with China’s game industrial policy thus far is that policy-makers are so ignorant about games”.
Meanwhile, Chinese game companies will face heightened competition and escalating promotional expenses in the global market in the future, which will present additional challenges for smaller and midsize companies in particular. Furthermore, Chinese companies with limited international experience face significant hurdles in attracting and retaining talent with local market and business knowledge, as well as effective global management skills. Ultimately, as with Chinese companies in other sectors, they will have to navigate geopolitical risks.
This paper was written in Japanese and translated into English via DeepL, which was then refined by the authors as a rough translation.
Chunji Jin
Chunji Jin is Professor of Marketing, Faculty of Economics, Seijo University. She received her Ph. D. in Commerce and management from Hitotsubashi University in 2007. Her research interests include consumer behavior and global marketing. Her work has been published in journals such as the Journal of Product & Brand Management, the International Journal of Hospitality and Tourism, and Foreign Economics & Management.
Reona Takahashi
Reona Takahashi is the founder and CEO of Grateek, Inc. In 2012, he received his MBA from the Graduate School of Commerce and management at Hitotsubashi University. He has been engaged in the development and distribution of online games since his time in junior high school. In addition to planning, developing, and managing original games, he has been supporting Japanese and Chinese game companies in exporting their products to each other’s countries since 2017. He contributed to the 2021 Annual Game Industry Report and the 2024 Famitsu Game Hakusho.
Ichiro Furukawa
Ichiro Furukawa is Professor of Marketing, Faculty of Business Administration, Musashino University. He received his Ph. D. in Commerce and management from Hitotsubashi University. His research interests include marketing and consumer behavior.
