
A first-of-its-kind free-trade zone (FTZ) was just approved for Shanghai by China’s State Council last Wednesday.

The 10 year project, known as The Shanghai Integrated Free Trade Zone (SIFTZ), will be constructed near the Yangshan Deep Water Port and will occupy over 28 square kilometers according to China Daily. The paper notes the SIFTZ will “provide world-class transport and communications facilities and a tax-free environment for domestic and foreign enterprises as a major hub of their supply chains in Asia.”

Through the FTZ, Shanghai’s government aims to strengthen trade and investment, create new methods for trade and investment management, and continue to broaden the service industry. The free trade zone is also likely to provide many opportunities for foreign firms and investors wanting to tap into Chinese markets, and one particular beneficiary could be the video gaming industry.

South China Morning Post interviewed several government sources who noted how the video game industry can play a role by investing in the new free trade zone – especially considering that the Chinese government will remove its thirteen-year ban on the production and sale of video game consoles. One source said, “You may think the game console is a small deal in the whole policy package for Shanghai, but it’s an interesting instance showing how China wants to open up to foreign investors.”

Video game consoles have been banned in China since 2000, but this is expected to change because of the SIFTZ. The ban applies only to the mainland, so videogame products are still easily available in Hong Kong and Macau because of their respective unique political statuses.

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Initially producing and selling game consoles were prohibited, but an exception was later made if components of these consoles were imported and assembled in Chinese factories and then exported abroad. Some consoles— like the iPhone, iPad, and Nintendo’s iQue player— have made it to Chinese markets because they were branded more as entertainment devices rather than as gaming consoles.

China’s Ministry of Culture and six other government agencies, including the State Economic and Trade Commission, the Ministry of Public Security, the Ministry of Industry and IT, the Ministry of Foreign Trade and Economic Cooperation, the General Administration of Customs, and the State Administration for Industry and Commerce, had put together a bill that banned gaming consoles because of concerns of how video game violence may affect the mental health and development of Chinese youth.

With the new SIFTZ, the rules for producing and selling consoles are changing. Foreign companies (including video game firms like Nintendo, Sony, and Microsoft) will be able market and sell their products in Shanghai provided that they register with the SIFTZ and are given approval “for specific products from ‘culture-related authorities’” according to the South China Morning Post article. These “authorities” would include the Ministry of Culture and other government agencies tasked with reviewing and ensuring video games and their content are not too violent or politically inappropriate. Devices that integrate social media sites like Twitter and Facebook would also have to remove these features, much as Apple already does with its iPhone and iPad devices.


By being able to review and approve of what software is sold, the government can essentially control what gamers play.

Despite the current ban, Microsoft, Sony, and Nintendo products have long been available to Chinese consumers via gray or black market channels. Most shoppers can find video game products in places like Guloudajie or Zhongguancun – the latter being one of Beijing’s most popular technology shopping hubs. Some of these places not only sell games and consoles, but offer hacking services to customize gaming systems to play pirated games. Pirated games and consoles are so prevalent that some gaming companies and consumers are wondering if revoking China’s console ban will make any difference.

But in reality, lifting the video game ban would likely reduce some of the piracy issues in China. Gray market entrepreneurs may decide to work legitimately since the new laws would enable them to more or less continue their trade. Also, an increase in the supply of legitimate and more reliable consoles and games will likely encourage consumers to purchase the real thing, since knock-offs are no longer the only “game in town,” so to speak.

For legitimate consoles and games that were already being sold (illegally) in China, lifting the ban will at least drive hardware and software prices down since these products will no longer be as much of a rarity – and sales will increase as a result of the price drop. Lower profits could, in turn, drive some pirates out of the trade as well.

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This is not to say that video game piracy will disappear entirely, especially since China has a plethora of problems when it comes to enforcing basic intellectual property protection laws. Still, removing the ban will at least allow gaming companies to compete in the Chinese market, which is so large that companies cannot possibly ignore it over piracy concerns.

Elleka Watts is an editorial assistant at The Diplomat.