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China has banned new mobile games from being launched in South Korea in retaliation for a military and political dispute.

The move is reportedly a response to the U.S. deployment of a missile defense system in South Korea. The Thermal High Altitude Area Defense system is designed to shoot down ballistic missiles and it could alleviate threats of an attack from North Korea. But China contends the anti-missile system is a “clear, present and substantive threat to China’s security interests.”

As a result, China has frozen licenses for South Korean developers, and that means games made in South Korea cannot be published in China.

That affects big companies such as Netmarble, which is preparing to launch its Lineage2: Revolution mobile game in the Chinese market. It made $176 million in its first month on mobile in South Korea alone. A spokesperson for Netmarble said, “We’ve already submitted the approval for Lineage2 Revolution through Tencent in China and it is in process. We are currently keeping a close eye on this.”

It might also affect Tokyo-based Nexon, which makes its games such as the upcoming Dungeon & Fighter 2D in South Korea. Nexon’s stock fell on the news.

China already requires 20 days of vetting before games are launched, and titles must comply with a number of restrictions.

In a statement, Nexon said, “When bringing any new game to China, a company needs approval from China’s State Administration of Press, Publication, Radio, Film and Television (SAPPRFT). Per recent reports, China will stop providing approvals for new games made in Korea going forward.
Given the fact that the new policy affects approvals on new games, but not the live games, we expect little impact on our live games currently being serviced there. Our new games made in Korea will be affected by this policy. However, among our new games, Dungeon & Fighter for mobile has already received approval from SAPPRFT, so currently we are expecting little impact as far as that game is concerned.”

Daniel Ahmad, analyst at Niko Partners, send an email comment on the ban to GamesBeat:

The Chinese government has been regulating the import of foreign games by using a licensing system for some time. This means that foreign developers and publishers will need to partner with a Chinese publisher and obtain a license to operate in China. This regulation has been in place for a few years on PC and became effective for mobile games in July of last year. Games that have already acquired a license, such as Dragon Nest Mobile by Eyedentity Games and Dungeon and Fighter Mobile from Nexon, have not been affected. Upcoming games such as Netmarble’s Lineage II Revolution, to be published by Tencent, has not yet been approved and so it’s likely it could face issues launching in China. Nexon have already seen their share price dip yesterday after the news, this is because around 40% of their revenue is generated from the China market each year.

We also think that while the licensed games are currently still allowed, there is always the risk that those licenses would be pulled. As we know, the regulatory landscape for digital games is tricky in China. Some of the biggest games in China are from Korea, including CrossFire and Dungeon and Fighter.

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