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Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
September 24, 2009
Industry Report
CHINA INTERNET AND MEDIA
CHINA ONLINE GAME: GAPP COULD MAKE A PUBLIC ANNOUNCEMENT SOON; MORE REGULATORY UNCERTAINTY
• According to industry sources, GAPP could be making a public announcement in writing to clarify its role in the online game
industry.
• We think the official document would affirm GAPP as the regulator of online game approval, and without the agency consent,
imported games could not be published in China.
• This document would be a response to the Ministry of Culture’s (MOC) statements to the press that it is the sole regulator
for online game approval, which led to the commercial operations of WoW.
• We understand that MOC has met with gaming companies to give its own interpretation of the central government’s guidelines,
which led online game company executives to believe that GAPP can only regulate CD-related games. We also heard a few other
smaller imported games were published along with WoW in China.
• We are likely heading into regulatory uncertainty as the political battle between GAPP and MOC intensifies. What we are not
certain post the GAPP announcement is : (1) how would MOC respond to it?; (2) how long is the reconciliation process between
the two government entities; and (3) what will happen to the WoW ex-pack during this time? The market seems to believe that
Wrath of Lich King will be approved quickly under the review of MOC.
• This development creates uncertainty for WoW’s expansion pack approval (NTES - $46.76 – Buy), in our view, as we believe this
political struggle may take some time to play out.
• On a separate note, a major newspaper issued an apology yesterday about its mis-interpretation of the central government’s
guidelines on Internet gaming. A reporter of the Be