China becomes a player in console games

Hello, this is Kenji from Hong Kong.

We’re in the midst of the twice-a-year corporate earnings rush. The first one comes in March, when companies announce their full-year results, while this one is for interim results — the local exchange here doesn’t require quarterly reporting. As the deadline to disclose mid-year earnings for most listed companies comes at the end of the month, the final two weeks of August become a traffic jam of earnings releases.

While stock markets in Hong Kong and in mainland China have been responding strongly to the ups and downs of the results coming out each day, a similarly large shockwave hit a group of shares in Shenzhen and Shanghai seen as having links to Chinese video game Black Myth: Wukong.

The title has been well received, not only in China but also overseas, and investors are keen to snap up “Black Myth concept shares”. Shanghai-listed Zhejiang Publishing & Media spiked 10 per cent, hitting the daily limit for gains, on Tuesday, the day the game was released. The company’s response to investors the day before briefly explaining that its subsidiary is in charge of the content, publishing and application process for the game, sparked heavy buying that continued on Wednesday.

Companies only linked to the game indirectly or by media reports also benefited. In Shenzhen, Citic Press Group and Qitian Technology Group each shot up 20 per cent on Tuesday, the daily limit for companies that went public under the new registration-based IPO system introduced four years ago. Meanwhile, Huayi Brothers Media Corp’s accumulated share price increase of more than 30 per cent in two days triggered the exchange’s disclosure obligation on Tuesday.

While this kind of extreme market reaction is usually transient, it also hints that investors sense something big may be on the horizon. Whether that turns out to be the case is yet to be seen, but our feature on the hit game may help you understand what all the fuss is about.

Next-level success

Black Myth: Wukong, a highly anticipated single-player role playing game, has been creating extraordinary buzz both in mainland China and beyond. One Chinese brokerage has even called it “a new milestone moment” for the game industry, Nikkei Asia’s Cissy Zhou and Wataru Suzuki report.

Released on Tuesday, the new game is based on the Chinese classic novel Journey to the West and puts players in control of the story’s protagonist, Sun Wukong, a mythological monkey king. Developed by Tencent Holdings-backed Hangzhou start-up Game Science, it is a console game, being released first for PC and the PlayStation 5, with an Xbox version to follow.

The Chinese game market has been dominated by smartphone games, but console games are gradually gaining ground. The success of Black Myth is expected to add momentum to this shift and could kick-start the sluggish global gaming industry.

But developing high-quality console games is notoriously expensive, with some comparing it to producing a blockbuster movie. According to a Chinese media estimate, Black Myth cost at least Rmb400mn ($56mn) to develop, excluding marketing fees.

AI in the classroom

South Korea’s plan to introduce artificial intelligence-powered digital textbooks in schools has provoked a backlash from parents and academics concerned about children’s overexposure to digital devices and potential misinformation.

According to South Korea’s education ministry, the tablets will be customisable so that “fast learners” and “slow learners” can be assessed by the software and given different AI-generated tasks with varying levels of complexity, write Christian Davies and Song Jung-a for the Financial Times.

Other AI tools to be introduced into Korean classrooms include programs that can transcribe a teacher’s remarks to an electronic whiteboard while they roam the classroom. The country has also piloted mobile robots offering AI-generated responses to student inquiries.

But the proposal has been met with opposition by many parents. “I am worried that too much usage of digital devices could negatively affect their brain development, concentration span and ability to solve problems — they already use smartphones and tablets too much,” said Lee Sun-young, a 41-year-old Seoul-based mother of two school-age sons.

Chipping away

The market for artificial intelligence chips is set to expand at a fast and steady pace, and while Nvidia remains far and away the global leader, a number of Asian start-ups and other industry names are trying to chip away at the American front-runner’s lead, Nikkei Asia’s Ryohtaroh Satoh reports.

Of the two basic categories of AI chips, “inference” chips used to operate existing AI models are expected to be the main driver for this growth in the coming years, compared to those used for “training”, or developing, new AI models.

Japanese AI unicorn Preferred Networks is developing chips for training but also sees an opportunity in inference chips. CEO Toru Nishikawa told Nikkei Asia that “there will be big changes in the architecture in this field . . . and whoever supplies a suitable architecture at the lowest price is going to win.”

Pay-off time

With heavy investment in 5G infrastructure now a thing of the past, China’s three major state-owned telecom operators are continuing to shift gears towards using their cash to pay higher dividends. This comes amid mounting pressures from the Chinese government, which is the major beneficiary of enhanced cash dividend levels, writes Nikkei Asia’s Kenji Kawase.

The two largest — China Mobile and China Telecom — are already distributing about 70 per cent of their net profit as dividends and are pledging to increase this to 75 per cent within three years. The combination of high dividends with low capital spending has been well received by stock investors, as these telcos are far outpacing the benchmark indices in both Hong Kong and the mainland.

The latest 5G-Advanced (5G-A) technology, seen as a precursor to the next-generation 6G, “will not require substantial investment”, China Telecom Chairman Ke Ruiwen told reporters.

China Mobile Chairman Yang Jie, meanwhile, said 6G will only enter commercial use in 2028 at the earliest, allowing them to spend more elsewhere.

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#techAsia is co-ordinated by Nikkei Asia’s Katherine Creel in Tokyo, with assistance from the FT tech desk in London.

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