A cubical shop in Huaqiangbei offering legit foreign game consoles.

Earlier this week, China Daily quoted an anonymous government source -- allegedly straight from the Ministry of Culture -- saying China is considering lifting a 12-year-old "ban" on game consoles soon. While it was unclear how reliable the source was at the time, the Tokyo stock market sucked it up anyway, with Bloomberg observing a significant rise for Sony and Nintendo after the rumor was published. Then today we learned from Tech In Asia that Dongfang Daily followed up with two representatives from the Ministry of Culture, one of which said the department has never looked into lifting the ban, while the other person was more vague about the matter. But here's the thing: game consoles were never really banned in China. Allow us to set the record straight for you.

Let's take a look at the actual paperwork that supposedly imposed the game console ban. In 2000, the video arcade business was booming in China, but many were illegal or were poorly operated and thus "seriously harming the healthy growth of youngsters." As such, seven ministries got together to come up with a plan. These included: the Ministry of Culture, 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. The outcome was a bill awkwardly titled "Feedback regarding the launch of special operation on video game arcades," and this was passed by the Chinese state council in June of that year -- merely three months after the release of the original PlayStation 2 in Japan.

In a nutshell, the bill covers guidelines on the safety requirements, opening hours and restrictions of video arcades, as well as what types of content are forbidden on the then-remaining arcade machines. Oh, and even internet cafes were forbidden from running businesses related to computer gaming, but that part of the ban is barely enforced these days. Anyhow, the specific parts that many assumed would put a stop on consoles were these:

"As of the day this report is released, the manufacturing and selling of any electronic gaming equipment plus its parts and accessories headed to China are stopped immediately. No company or individual can partake in the manufacturing and selling of electronic gaming equipment plus its parts and accessories headed to China."

"With the exception of processing trade, the import of electronic game equipment plus its parts and accessories through other forms of trade is strictly limited."

Note that the bill's main purpose is to keep underage folks away from dangerous venues and unhealthy content, rather than to prevent gaming addiction -- something for which China eventually had to set up boot camps to deal with. It's also worth pointing out that the ban on manufacturing and selling arcade machines has not been valid since April 2009, and you can find a list of approved machines on the Ministry of Culture's website. But going back to 2000, the above statement uses the term "strictly limited" for the import of game consoles, meaning there's still space for negotiation.

A girl brings a PS3 from Hong Kong into Shenzhen.Indeed, Sony did do a low-key launch for the PlayStation 2 in China in January 2004, but only in two cities instead of five as originally planned, thus upsetting many distributors and gamers in the neglected regions. According to a report by Tencent, Sony's only official statement regarding the launch was this: "The PlayStation 2 computer entertainment system is now in Shanghai and Guangzhou to meet you." Yes, a "computer entertainment system." But even with the cheeky use of words here to dodge the law, Sony's real problem came after China's auditing system blocked a huge portion of the games that were deemed unhealthy, thus providing more excuses for folks to just get pirated games. And at ¥1,988 ($320) per device due to heavy import duties on foreign products, the PlayStation 2 for China was nowhere near as attractive as the ones sold in the black market -- this was at a time when the PlayStation 2 was available for just $179 in the US. With such easy access to the rarely policed black markets in big cities like Shenzhen and Beijing, it didn't make sense to buy the more expensive Chinese PS2 and its games, anyway. Even the official ¥500 ($80) drop about a year later didn't save the console in China. The PSP and the PS Vita also never officially made it to China presumably due to the strict content restrictions, but like many other flagship gadgets, they were quite popular on the black market.

Sony hasn't given up, though. Last June, Sony Computer Entertainment opened its China headquarters at Guangdong Animation City, a government-backed project in Guangzhou to boost the local animation and gaming industry. The following month Sony made a surprise return to Shanghai's Chinajoy, the country's largest gaming expo, after a four-year hiatus. Coincidentally, the previous-gen PlayStation 3 (CECH-3012A and CECH-3012B, as sold in Hong Kong) was quietly granted a China Compulsory Certificate or "CCC" around the same time, only to be withdrawn by Sony soon after the discovery in November, as the database screenshot below shows.

Editorial China never really banned game consoles, just didn't make life easy for them

Speaking to Sina Games in December, SCE Asia's Director of Planning and R&D Eitaro Nagano admitted that the biggest obstacles for his company right now are still the legal requirements in China, but his team's still communicating with the government over this issue -- presumably mainly to do with the content auditing. Nagano also acknowledged the fact that China already has many PS Vita and PS3 users, along with many developers with great potential.

Despite Sony's failed attempts, Nintendo has had better luck with its handheld consoles under the iQue brand, a joint venture between the Japanese company and Chinese American entrepreneur Dr. Wei Yen. In November 2003 the company launched the ¥598 ($96) iQue Player, a somewhat experimental version of the N64 that packed the brain and a flashable game cartridge inside the controller. As an attempt to avoid piracy, the games were downloadable using an iQue Depot in stores, and it was ¥48 or about $7.70 a pop with free updates forever, but each cartridge could only store one game.

Editorial China never really banned game consoles, just didn't make life easy for them

Sadly, the console never took off due to its poor marketing and inconvenience, and pirated games eventually appeared. Since then, iQue has instead been focusing on handhelds, including the Game Boy Advance, SP, Micro, DS Lite, DSi and 3DS XL. To fight the likes of R4 cards that let people pirate games, the iQue's 3DS XL is bundled with Super Mario 3D Land and Mario Kart 7 by default for the price of ¥1,699 (US$270), which is understandably higher than Hong Kong's HK$1,749 (US$225) and the US' US$199.99 for the device alone. But hey, at least iQue gets to openly sell its consoles -- take a look at the "About" page on the company's website and you'll see why it's the Chinese government's darling:

"The reason Nintendo is iQue's best partner is because the former has always been strongly opposed to violence and pornography in the gaming industry, and its mission is to develop quality healthy games suitable for all ages, at a global gaming market flooded by vulgar products today, Nintendo still maintains a precious social responsibility and business ethics, therefore is consistent with iQue's corporate philosophy and the Chinese moral values."

But wait, even the innocent-looking 3DS has violent games! Well, not in China. iQue's website only lists a handful of major titles that are mostly, if not all, made by Nintendo, including the two aforementioned 3DS titles and six DS titles (Nintendogs, WarioWare, Yoshi's Island DS and more), along with several downloadable DSiWare apps. Fortunately, the devices are still compatible with normal DS games from outside China, though normal DS devices can't play games released by iQue. As for the Wii, Nintendo did announce that it would launch the console in China in 2008 (and iQue even obtained the CCC in December 2007), but that never happened after it failed to get the other authorities' approval. We'll probably never know exactly why this was the case, but at least the Wii is all over the black market, ironically.

Don't worry -- we haven't forgotten Microsoft, which is the least active of the three companies in the Chinese gaming market. Last September, Microsoft announced the Kinect's availability in China, but the catch was there would be no Xbox 360 to go with the motion-sensing peripheral, meaning only the developers could make the most out of the sensor on a PC. Conveniently after Microsoft's announcement, the Ministry of Culture promptly denied the speculation that it was about to make it easier for foreign companies to sell their consoles and games in China.

iReadyGo handheld console

Ironically, the console black market in China is, well, not that black at all. We've seen plenty of small shops in Shenzhen and Beijing that openly sell imported consoles (as well as KIRFs), and you can even pick one up from online retail platform Taobao, where some resellers claim to be offering devices that were confiscated and then released by customs. Yes, another gray area in the system. But even without those machines from outside China, the country itself has already been pumping out its very own gaming devices, including the shameless iReadyGo (pictured above), the Lenovo-backed Eedoo and various Wii clones. Clearly, the ban isn't as strict as it appears, especially to the local brands and venues that stay well away from content related to gambling and pornography -- we all know what happens when they don't.

So to summarize: the real challenge for the game console makers is to convince the Chinese government that their devices won't touch any "unhealthy" content, which is actually near impossible for Microsoft and Sony, whose gaming success relies heavily on realistic shooting and fighting games. Nintendo, however, doesn't mind offering a much smaller game library for its handhelds in China, though it remains a mystery as to why the Wii never made it to China as originally promised. Not that this matters to the majority of Chinese gamers, who have developed a huge appetite for RPGs like Warcraft and Diablo on the PC.

Editorial China never really banned game consoles, just didn't make life easy for them

Now, will China ever loosen up on the legal requirements for games? With the recent transition in the government and the boom in local smart devices (especially Android, which offers considerable freedom when it comes to app sources), it's easy to see why these rumors have made a comeback; but then again, you have to remember that the authorities behind the Great Firewall have not backed down at all. Worse yet, in the latest five-year plan (published on December 1st) for the development of China's service industry, the government specifically encourages more support to help local gaming products to go global. Such favoritism suggests things aren't going to change any time soon for Sony and Microsoft.