Korean Games Miss Out on the Golden Opportunity as They Wait for Chinese Foreign Game Licenses

Foreign Game Licenses Plummet by 39% in First Half Compared to Last Year

Delays in License Approval Reduce Game Freshness

Pilot Policy Adds to the Burden for Developers

Expectations for the lifting of the ‘Korean Wave ban’ have diminished, and the Chinese government’s issuance of foreign game licenses (banhao) has decreased, slowing down the entry of Korean game companies into China. Chinese authorities control the entry of foreign games into their domestic market through a license approval system, and as the issuance of these licenses faces ongoing delays, the timely distribution and market success of Korean games in China is increasingly under threat.

According to the gaming industry on July 14, the National Press and Publication Administration of China issued 917 domestic banhao and 35 foreign banhao in the first half of this year. Compared to the same period last year, domestic banhao increased by 21%, while foreign banhao decreased by 39%. While more than 1,000 licenses have been issued annually since 2023—following their lowest level in 2022—the proportion of domestic banhao is as high as 90–95%. For Korean games, the number of licenses issued fell from nine in the first half of last year to seven in the first half of this year.

Morningstar, an American investment research firm, pointed out in a recent big tech analysis report on China that the reason for the drop in the share of purely foreign banhao is due to local pilot policies. Major cities such as Shanghai have introduced a pilot system since the second half of last year, which provides foreign gaming companies that establish direct local subsidiaries with much more rapid regulatory relaxation akin to domestic banhao status, rather than treating them as pure foreign entities. As a result, many joint ventures of foreign companies have shifted to a domestic track by reorganizing their corporate structure, rather than waiting over a year for a foreign banhao.

Previously, in order to circumvent the restrictions and obtain a domestic banhao, companies had to transfer ownership of intellectual property (IP) and source code to Chinese joint ventures or assign them under contract. However, as these stringent requirements drew increasing complaints from companies, the Chinese government responded by introducing a pilot policy: if a developer formed a local development team and produced games directly—even without establishing a joint venture—they could still be treated as domestic businesses.

The issue is that such policy changes do not align with the traditional business structure of the Korean gaming industry, which typically completes development at home and then exports finished games to China. Small and medium-sized game companies with limited funding find it difficult to take advantage of the pilot policy, while large companies developing games locally are still exposed to the same risks of technology and talent leakage as when operating through joint ventures. In effect, these changes offer little practical benefit to Korean game developers.

As a result, Korean game companies are left with few choices except to license their IP to companies like Tencent or focus on obtaining foreign banhao. However, due to delays of several months or even years in the review and approval process, the freshness and appeal of these games is diminished, according to industry representatives. At a time when Chinese games featuring cutting-edge graphics are dominating the market, delayed entry by Korean games leaves them at a distinct competitive disadvantage.

An industry official stated, “The issuance of banhao in China seems to be used as a tool to strengthen the position of domestic games. Gaming is highly sensitive to trends, but if you look at Korean games that recently received foreign banhao, most were originally launched several years ago.” He added, “It is becoming increasingly difficult to expect major hits in the Chinese market, as was possible in the past.”

This content was produced with the assistance of AI translation services.