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2009 2010 2011 2012 by the End of 2012 There Were 136,000 Foreword There is no doubt that China has deservedly This report covers some basic information earned its reputation as a dynamic, large on demographics, politics and cultural and fast growing games market. It has context, as well as brief descriptions of the become an important constituent of the media, entertainment, telecoms and global games industry and what happens in internet sectors. It also contains short China is increasingly relevant to many profiles of the key local players in these executives outside of China. However, the sectors, including the leading local Chinese games market is in many respects AppStores, Search Engines and Social very different from other markets, in Networks. particular the main Western ones. To understand the Chinese games market it In the second part of this report, we helps to have a basic understanding of the describe the games market in more detail, broader cultural, economic and incorporating data from the recently technological context. released official China Game Publishers Association Publications Committee report, At Newzoo we have always promoted a our own research findings as well as some global perspective on the games market. In third party data. 2010, we started covering the Chinese market and completed our first large We also provide brief profiles of the key proprietary primary consumer survey in public and private game companies, some 2011. We since have developed extensive of the most popular client games and the knowledge of the Chinese market and its key game media companies that offer news main players, allowing us to assist our and information about games and the clients with access to, and interpretation of, games market. data on the Chinese games market. At the same time we assist many Chinese We hope you find this report useful and if companies in assessing the business you have any questions, or spot any opportunities in Western markets. inconsistencies, please contact the authors below. Based on discussions with our clients, we realised that many US and European Thijs Hagoort executives lacked insight into the broader Co-founder Chinese market context. By publishing this [email protected] high level report, mostly based on public data, we hope to offer our Western clients a good first step in becoming more familiar Huijun Shi with the Chinese market. Research Analyst [email protected] 2 Quotes “The Newzoo Chinese Games Market introduction provides a good basis for understanding the rapidly evolving Chinese game industry. We believe that Western game companies seeking to enter the China market need an experienced partner that not only understands local China market practices and users, but is passionate about their games. The China market is equally challenging and rewarding for those companies who seek to dedicate their development teams to truly understand the differences and commonalities of Chinese gamers.“ Jay Chang, CFO KongZhong “The fragmented Chinese mobile games market requires a very different approach than in the West when it comes to marketing. It can be very successful, you just need to know the social channels used by the Chinese consumers of today and how you can use them to promote and distribute your game. At Zenna, this is our daily business”. Inna Zaichenko, CEO Zenna Apps “The Financial Times of February 17, 2014, quoted Mrs Annie Xu, US General Manager of Alibaba, the giant Chinese ecommerce group, saying “Chinese consumers are crazy about anything not made in China….this is still a huge opportunity”. When it comes to games a huge paradox arises. As this report will point out, big Western game IP is hugely popular despite the enormous variety and high quality of locally developed games. At the same time, Western games that are hacked and localized by amateurs are played by tens of millions of Chinese but don’t bring in any money for the publishers. Ultimately because there is a mismatch of business models between the West and Asia.” Peter Warman, CEO Newzoo 3 4 5 Introduction People’s Republic of China Territorial Structure China is the world’s second largest country In terms of territorial structure, China is by land area, covering 9.6 million square divided into 23 provinces, 5 autonomous kilometers. Lying on the west coast of the regions, 4 direct-controlled municipalities Pacific Ocean, China enjoys a very diverse and 2 self-governing special administrative landscape, extending across six climate regions. Though the PRC claims Taiwan as zones. its 23rd province, Taiwan is formally part of a (semi-) sovereign state, the Republic of The establishment of the People’s Republic China. of China (“PRC”) was announced by Communist Party Chairman Mao Zedong in Provinces The highest-level Chinese administrative 1949 after the Chinese Civil War ended with division. Every province has a Communist Party of China provincial committee, which is in the Communist Party in control of mainland charge of the province. China and the Kuomintang fleeing to Taiwan. Autonomous Inner Mongolia, Guangxi, Tibet, Ningxia and Regions Xinjiang are regions with a relatively high minority population. Like provinces, they have China has since been a single-party state their own local goverment, but more legislative governed by the Communist Party. The rights. primary organs of state power are the Municipalities Beijing, Shanghai, Chongqing and Tianjin are National People’s Congress (NPC), the very large cities directly-controlled by the President and the State Council. The central goverment. President is also the Secretary General of Special Hong Kong and Macau are regions that do the Communist Party. The NPC is under Administrative not form part of mainland China and enjoy a direct control of the Communist Party. Regions degree of political autonomy, whilst part of PRC. The NPC is the highest state body and the only legislative house in the PRC. It meets annually for about two weeks to review and approve major new policies, laws, the budget and key personnel appointments. The President and Vice-President are elected by NPC every five years. The current 7th president is Xi Jinping who succeeded Hu Jintao in 2013. The State Council is the highest executive branch of the PRC and is appointed by NPC. There are about 50 members in the Council, including the Premier and 4 Vice-Premiers. 6 Demographics Population Ageing According to the latest census by the According to a UN report, the share of the National Bureau of Statistics, the population population aged 60 and over will rise from of mainland China was 1.347 billion on the 13.8% in 2013 to 32.8% in 2050, compared 31st December of 2011. This makes China to 27% in US (2). China’s low birth rate, the most populous country in the world, combined with the aging population, poses expected to be surpassed by India in 2050. a demographic challenge. The growth rate of the population has been Age Breakdown of Chinese Population (2011) limited by the One Child policy that was 11% introduced in 1979 in order to alleviate 24% social, economic, and environmental 13% <10 problems resulting from rapid population 10-19 growth. It is estimated that the policy 20-34 averted 200 million births (1). The population 27% 25% 35-49 is expected to decline after 2030. >50 Source: National Bureau of Statistics of China Ethnics and Language The population is made up of Han Chinese Urbanization (91.5%) and 55 different minorities (8.5%). In China is rapidly urbanizing: over half of all total, China has about 80 types of languages Chinese now live in urban areas (see graph and 30 different kinds of scripts. Putonghua below). The most populous cities are coastal (Mandarin), based on the Beijing dialect, is cities in the east of China. In 2011 there the official language of China, which is also were 127 cities with a population of more the common language of the Han ethnic than 1 million inhabitants and 14 cities with group. The Han also have diverse dialects more than 4 million. According to some such as Yue (Cantonese) and Wu predictions, 70% of Chinese will live in (Shanghainese), which are widely spoken in urban areas by 2035 compared to about several regions. The minorities 80% currently in the US. communicate verbally mostly in their own language or dialect. Urban and Rural Population (in M) 1000 800 600 400 200 0 Urban population Rural population 1. Wang Feng, director of Brookings-Tsinghua Center for Public Policy, paper published in 2011 and reported in Boston Globe (www.boston.com) in October 27, 2011. 2. UN World Population Report, The 2012 Revision. Published 13 June 2013. 7 Economy Economy GDP China was a Soviet-style centrally planned As a country, China ranks number two in economy from its founding until 1978, when the world by nominal GDP and by PPP the Communist Party started implementing (purchasing power parity), after the US. reforms aimed at developing a more However, on a per capita income basis, market–oriented economy. According to China ranked only 87th by nominal GDP IMF, China is the world’s fastest growing and 92nd by PPP in 2012. major economy, with an average growth GDP Per Capita ($) rate of 10% over the past 30 years. 49,965 12,708 US Poland Development Milestones 1978 Communist Party launches market 46,720 11,340 reforms backed by Deng Xiaoping; Japan Brazil 1980 Shenzhen is made the first “special 41,514 10,666 economic zone” to experiment with German Turkey more flexible market policies; 38,514 6,188 2001 China enters the WTO; UK China 2005 China becomes the world’s fourth- 14,514 1,489 largest economy and loosens the Russia India yuan from a strict dollar peg; Source: World Bank, GDP per capita data tables.
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