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The Chinese market has always been attractive to foreign investors—it has the world’s fastest growing consumer market and is also the second largest importer of goods after the United States. One of the most popular consumer goods in the world is the video game console. For over 40 years, video game consoles have been a product that has had a presence in homes around the world.

The Chinese government banned the sale of video game consoles in 2000 amidst fears of having “adverse effects” on Chinese youth, but the ban only forced Chinese consumers to flock to the gray market to buy video game consoles. A gray market is a market where commodities are traded through legal distribution channels, but are not authorized by the original manufacturer. One major exemption to the ban was the city of Shanghai, which is a Special Economic Zone (SEZ) of China where business and trade laws are different from the rest of the country. These zones were created during the 1970s when reformers in the Chinese government decided to experiment with a market-based economy.

15 years later, China is finally allowing video game consoles to be sold in the country. However, it faces several challenges. PC gaming is widely popular in China, where analysts predict a market of 515 million gamers. Popular PC games such as Counter-Strike and World of Warcraft are played regularly in China, and mobile gaming is also expanding rapidly as the Chinese consumer market accesses free-to-play and “freemium” (initially free-to-play with in-game purchases) apps through smartphones.

The three major console manufacturers, Sony, Microsoft and Nintendo, have reacted positively to China’s opening of their market to video game consoles. “We welcome the move,” Sousuke Kamei, a spokesperson from Sony, said to CNN. “We remain committed to delivering fun and exciting console gaming experiences to as many Chinese users as possible.” Nintendo said that they were in the process of doing research on the Chinese market, while Microsoft said that the “future is bright for gaming in China.” According to TopTechNews, local Chinese manufacturers such as ZTE, Xiaomi, and Baidu could also benefit by positioning their own entertainment devices as gaming consoles, bringing more competition to the market.

One obstacle standing in the way of console manufacturers, game developers, and game publishers is China’s long-standing censorship laws regarding video games. According to TechInAsia, China’s Ministry of Culture has very stringent regulations on video games. Several of these regulations have to do with China in particular. “Anything that violates China’s constitution; threatens China’s national unity, sovereignty, or territorial integrity; harms China’s reputation, security, or interests; violates China’s policy on religion by promoting cults or superstitions; harms public ethic or China’s culture and traditions” can apply to a broad swath of gaming content. Several games have been outright banned in China for these reasons, and games that have made it to Chinese shores have been censored and distributed under local publishers, such as The9, which distributes World of Warcraft in China.

The reasons for lifting the video game console ban have been a topic of discussion for analysts. According to a US News article, the Chinese government might believe consoles are far easier to regulate than the Internet. “The authorities for some reason decided that video game consoles aren’t as detrimental to youth or any other interest they were trying to protect as they had thought,” said Sarah Cook, a senior research analyst for East Asia at watchdog organization Freedom House. “It could also reflect their general wariness of people turning to online resources or looking for ways to get around government restrictions, which could potentially bring them into contact with information the government fears even more.”

Cook also added that the government could also be catering to the demands of a growing Chinese middle class, who want more access to consumer goods produced in Western nations. While console manufacturers, game developers and game publishers might benefit from expanding into the Chinese market, it will also be forced to self-censor their products to meet China’s strict censorship regulations on video games. It also has to compete with already-large PC and mobile gaming markets, making the entry of consoles into the Chinese market a difficult task. However, the gaming atmosphere in China is still active and vibrant, which is good news for the concerned parties.

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