I have just received several documents relating to last weeks announcements from the Chinese General Administration of Press and Publications (GAPP) “prohibiting foreign investment in domestic online gaming operations through joint ventures, wholly owned enterprises and cooperatives.”

We had reported earlier this week about the contradicting statements from the Ministry of Culture and the GAPP, as well as the underlying reasons for this continuing power struggle between the two institutions.

The first document is a transcription of the speech from Mr. Tuo Zuhai, deputy director of MOC’s Department of Cultural Market, that he gave during GDC China this week.

He started by saying “General Administration of Press and Publication must stop the surly interference in domestic online game enterprises. It is MOC’s duty to ensure the long-term development of China’s culture industry, especially the game industry.” He went on by clarifying the roles of the three involved government bodies Ministry of Culture, State General Administration for Radio, Film and Television, and General Administration of Press and Publication, referring to it as the “Three-Determination” Regulation.

Tuo Zuhai, deputy-director of the Culture Market Department of MOC during GDC China

Mr. Tuo made clear that “(the) Ministry of Culture is further stressed to be the competent authority in charge of the administration of online games” and continued by referring to the recent GAPP announcements saying “recently General Administration of Press and Publication issued another notice and this will surely accelerate the full control by MOC. This is an major and important issue of right and wrong, and is a matter of principle, as mentioned the day before yesterday by the officials of the Office of Central Institutional Organization Commission. We will never compromise on such a matter of principle.”

The second document we received is a translation of an older notification from the Ministry of Culture from September this year, just before GAPP issued its counter announcement. The document clarifies once again that it is the administration body for the operation of online games in China. The document also refers to the delays in re-launching World of Warcraft in China, after Blizzard had decided to discontinue working with The9 as their exclusive operator and awarded the contract to its competitor NetEase. NetEase had launched World of Warcraft on September 19, after it had received approval from the MOC already in July but without the approval from the GAPP.

You can find both documents as downloads on our website here.

Source: Exclusive: Clarification from the Ministry of Culture on Chinese online game investments

Apparently good news for people that love bad news: just in time for “GDC China” which is taking place in Shanghai these days (not to be confused with “China GDC” …), the Chinese General Administration of Press and Publications (GAPP) issued several notes, which were instantly picked up by Western media, reinforcing once again its announcement from earlier this year that “foreign businesses were banned from investment in China’s online game operations through setting up wholly owned enterprises, joint ventures and cooperatives.”

However, as Inside Social Games quotes a Beijing investor correctly: This is a) not a new policy and b) “total BS”.

Its just another display of power in the ongoing fight between the Chinese Ministry of Culture (MOC) who is backing up Think Services “GDC China” event and GAPP which supports the rivaling China GDC event from Howell Expo (Think Services former 2007 JV partner).

All of the large Chinese game companies are listed on international stock exchanges and/or invested by foreign VC, so are all of the currently most promising rising stars.

How to publish or operate a game title in China:

For simple licensing deals or software development in China, a WOFE or in some cases even a rep office is sufficient. However for actually publishing or operating games in China foreign companies are not entitled to hold the required game licence.

There are 2 work-arounds for this:

• JV with the Chinese partner holding a majority stake
• The the so called “Sina Structure” – see graph below

For licensing deals, approval usually takes around 8 months (not including time required for localization and other revisions).

According to GAPP each application will take up to 80 business days before any decision to be made. This however does not include game testing time, which can lead to GAPP ending up testing your game forever.

For the second option the entire process can take between 18 to 30 months or longer.

The key to success (as with all business in China) is of course your domestic partners relationships with all involved parties.

Source: China bans foreign investment in-online games: O RLY?