Video Game Consoles Are Now Legal In China; That Doesn't Mean Much Yet

You may recall that, back in September, China began flirting with the idea of lifting its long-time ban on foreign consoles. Well, I've got good news for you, folks: they've finally made good on those plans. The Chinese government today announced that, after nearly fourteen years, they are officially making it legal to buy and sell video game consoles in the country.

Well, sort of. The legalization isn't without its caveats. Consoles may only be sold in designated free trade zones such as Shanghai, where they must be inspected and approved by government officials before going on sale. 

It's also not clear for how long China will lift the ban. Though it's somewhat unlikely, the Ministry of Culture could very easily decided to re-institute it in a matter of days. For the time being, however, the Chinese government's acceptance of foreign video game consoles - just a few months after the launch of the PS4 and Xbox One - has potentially opened up a new region for video game developers and console manufacturers. 

Unfortunately, I have my doubts as to whether or not this move will prove to be a lucrative one. Even though China's lifted the ban now, it's been in place long enough to do a great deal of damage to the Chinese games industry, contributing to an incredibly volatile market rife with more software piracy than any other region in the world.

Back in June 2000, the Ministry of Culture - responding to a parental outcry about the dangers of video games to young minds - issued a notice that forbade any company or individual to purchase or sell electronic game equipment or accessories to the country. The following year, the online games market exploded, with the market size quickly reaching $100 million. In other words, the ban accomplished absolutely nothing, mainly because it failed to address PC gaming. 

That wasn't the only problem with the edict, either. Although the ban prevented the legitimate sales of consoles, it wasn't strictly enforced - no regulatory body existed in the government to oversee it - and contained a number of loopholes that made products such as Nintendo's iQue player completely legal. Although not technically a console, the player can plug durectly into a television, and houses a removable 64MB flash memory card onto which players can download a host of Nintendo 64 titles. 

"We have targeted people in developed countries such as Japan, the US and Europe with sophisticated machines," Nintendo president Satoru Iwata explained in 2003. "To reach a wide range of people in China, especially those inland who are not as rich as those in coastal areas, we thought we needed to deliver a cheaper console."

That financial disparity, lack of oversight, and underground nature of console gaming have together caused piracy in the region to thrive.

"Game consoles primarily make their way into China through the gray market," explained Niko Partners Analyst Lisa Hanson to Kotaku in 2010. "Many gamers who acquire consoles this way also get them modded so they can play pirated games either for free or incredibly cheap." 

What this ultimately means is that China's still got a very long way to go before it could be considered a remotely lucrative market for console gaming (PC gaming is another matter altogether). Because of a long history of piracy coupled with an unstable regulatory environment, organizations such as Sony and Microsoft are hesitant to establish themselves in the region - even if it does serve as one of their chief manufacturing cores. 

We recognize that China is a promising market," a Sony representative said in a statement to the BBC."We will continuously study the possibility, but there is no concrete plan at this stage." 

Lifting the ban on video game consoles is a good first step for China. Ultimately, however, if they truly wish to welcome the industry into the nation, they first need to address the widespread piracy epidemic. Until such a time as they do, the region is still extremely unstable for the console market - and hence not necessarily worth the effort.