There are a number of explanations why this could have happened but most people seem to agree that it could have something to do with the tighter regulation imposed on the industry by the Chinese government. According to Bloomberg, Beijing has taken steps to oversee an industry which it views as causing addiction and health problems amongst the country's youth. It also comes at a time of a major rework in the setup of the Chinese state bureaucracy. In light of this, the granting of video games licenses has slowed to a crawl, with no new permits approved since March 2018.

It's a major change for an industry which has exploded in the last decade. Many had hoped that the restrictions would be lifted by now but there is now something of a backlog of pending licenses.

"There are already thousands of gaming licenses pending approval," said Gao Baowen, a gaming analyst with Shanghai-based Orient Securities.

"Judging from the monthly approval number of 700 to 800 titles, the existing applications will need two-to-three months to be approved."

But this is not the only explanation behind the market slow down. Some experts have claimed that the slowing industry growth is merely a result of oversaturation in the market. Whatever the reason, Chinese game companies have been hit. Tencent Games has been hit heavily in recent months. According to CNN, shares of the company have fallen by around 40% from their January peak, costing the Hong Kong-listed business around 1597.42 billion Yuan (US$230 billion).

Tencent Games is the largest gaming company in the world. The conglomerate has minor stakes in some of the biggest developers on the planet including Epic Games, Activision Blizzard, and Ubisoft as well as holding a majority stake in Riot Games and Supercell. Usually, this would be seen as a disaster for the company but according to one new report, that may not be the case.

"Near-term there are regulatory challenges in China, but for longer-term overall industry growth prospects within Asia, we expect gaming revenues to increase from US$60 billion in 2017 to almost US$200 billion by 2030," said Sundeep Gantori, an equity analyst at UBS CIO Global Wealth Management.

"We are content on long-term growth prospects because Asia, as a region, has a strong culture of gaming, not just in China but across Japan and Korea."

It will make for good reading for Chinese game developers with the report estimating that the industry will continue to expand by around 10% in the coming years. The report comes at a time when China is also making headway in the world of eSports, or competitive gaming. After all, competition is one of the main reasons why people play video games. According to research by Betway, that sense of reward we get from winning at something increases the levels of dopamine in our brain, making us feel good.

With that in mind, steps have been taken to encourage the growth of competitive gaming in and outside of China. PC gaming giants, Alienware has recently opened a brand new state-of-the-art eSports arena in Suzhou. Similarly, three new Chinese teams have joined The Overwatch League, the multi-million dollar eSports league run by Blizzard.

The growth of the Chinese video games industry in the last decade has been nothing short of extraordinary with a year-on-year improvement of roughly 10%. Things have slowed down this year with fewer new titles given licenses to operate in China but things will pick up once again. That UBS report puts things in a good light and it seems as if this is just a temporary blip in the future of the Chinese industry. Things are looking up for games developers in the country.