Tencent is under new pressure as a result of the Chinese government's continued crackdown on its domestic tech industry. This is despite Tencent's best efforts to comply with changing regulatory expectations.According to the BBC, Beijing has filed a civil lawsuit against Tencent for claiming that its messaging app WeChats Youth Mode violates laws protecting minors. NetEase is a major Chinese tech company that will delay the IPO for its music division in Hong Kong. Why? Reuters: Uncertain regulationsThe Exchange studies startups, markets, and money.It's available every morning at Extra Crunch. You can also subscribe to The Exchange newsletter every Saturday.China's latest bad news comes after a series of regulatory changes and government actions that have resulted in a significant loss of equity value. After a period with relatively low regulatory oversight, many domestic Chinese technology companies found themselves in defense. The Chinese Communist Party (CCP), which sought to take their market power in antitrust terms as well as some of their business operations from different perspectives, has taken over. Fintech and edtech are the most affected sectors.Gaming is also being considered by the CCP.Shares of companies such as Tencent and NetEase dropped after the state media said that the gaming industry was providing the digital equivalent to drugs for the nation's youth last week. Riot Games, the makers of League of Legends, is owned by Tencent. NetEase also generated $2.3 billion gaming revenue from its $3.1 billion total revenue in the most recent quarter.NetEase stock was trading at $110 per share late July. After expectations shifting in light of gaming news, NetEase stock now trades at $90 per share. This indicates that investors are worried about its future performance. The stock listed on Tencent Hong Kong has also dropped, falling from HK$775.50 today to HK$461.60.Tencent attempted to evade regulatory pressure by announcing changes in how it controls access its games. This was after governments had shot across the bow. It doesn't seem to have worked. Tencent is being sued in court by the government for its public announcements of changes to its youth gaming policy. This suggests that the proposed restrictions were not sufficient or even moot at the start.
