China is in damage-control mode after its crackdown on video games sparked an $80 billion market meltdown

• China's video games regulator announced new draft rules for online games last week.
• The announcement triggered a massive selloff in gaming stocks.

China appears to be getting cold feet about its new restrictions for online games after an $80 billion market selloff.

On Friday, Chinese officials announced new draft rules aimed at limiting how much gamers can spend, and restricting rewards that encourage them to spend more time online.

The announcement came out of nowhere, spooked investors, and sent markets into a tailspin.

Games giant Tencent saw its share price slump as much as 16% while the stock of its rival NetEase tumbled a record 28%. Shares of social media service Bilibili, which is popular with gamers, tanked 14%.

These three stocks alone lost over $80 billion in market value on Friday after China's announcement, according to Bloomberg's calculations.

Online games-related shares listed as far afield as the US and Paris also slid on the news.

Investors seemed to fear a resurgence of a harsh crackdown against the tech sector that started in late 2020 and continued to around mid-2023. The crackdown weighed on China's economy, which has been struggling to stage a convincing recovery following nearly three years of on-off pandemic lockdowns.

The regulator in question — China's National Press and Publication Administration — appeared to walk back its harsh intentions pretty quickly.

It began seeking to sooth the industry the next day, saying in a Saturday notice that it would seriously study the industry's reaction and improve the draft rules.

On Monday, the regulator announced it had approved 105 new online games — a likely sign that Beijing is easing up on its latest restrictions.

The slate of approvals demonstrates the authority's "active support for the development of online games," the regulator said in an official WeChat statement on Monday.

China's online games crackdown isn't new. In 2021, Beijing banned those under the age of 18 from playing on weekdays. It also restricted them to 3 hours of gaming on weekends. The move was aimed at curbing gaming addiction.