While China overtook the US as the "gamer capital of the world" in terms of market size in 2017, the year of 2018 turned out to be a bit more like The Empire Strikes Back.

Just when everybody thought the industry was set to continue the rapid growth experienced in the years prior, the industry ground to a halt a few months into the new year.

Licensing authorities stopped approving new games from March to December, which launched the industry into what many would call the “Video Game Winter”.

So much happened this year, that we couldn't even fit the blocking of Twitch in China -- just weeks after it suddenly gained popularity in the country!

Here’s the top five stories that shaped China’s gaming landscape in 2018.

(If you’re wondering why there’s no esports on this list, well… check back next week.)

China stopped approving new games for 9 months

China stopped licensing new games from March to almost the end of the year, with the freeze ending just before Christmas. The exact reason behind this freeze was a bit murky, but reports said that it’s likely due to bureaucratic infighting. But whatever the reason might be, it had a huge impact: China’s gaming industry suffered its slowest growth in at least a decade.

The licensing freeze also stopped a number of existing games from being able to monetize. For instance, players can’t buy in-game items from PUBG Mobile -- Tencent’s marquee game of the year -- despite the game’s huge popularity.

Meanwhile, during the regulatory hiatus, the government has voiced strong concerns over issues like childhood myopia and online addiction around gaming. The convergence of the many negative signals raised by the government has caused Chinese gaming companies to see their stocks taking a dip in 2018.

Tencent made two PUBG Mobile games for China and published one of them internationally. The international version now has more than 200 million players. (Picture: Tencent)

Gamers angry at the arrival of Steam China

During this year’s E3, Valve said that it’s launching a China-only version of Steam — Steam China — in the country with the help of its local partner, Perfect World. It’s important to note that the global version of Steam is currently accessible in China. But the platform is not officially approved by the government, effectively putting it in a grey area.

There are tons of Chinese users on the international version of Steam. But Chinese gamers didn’t take news of a local version too well. They fear that Steam China will be a heavily censored version of the platform, with a very limited number of games available for purchase. They also worry that the arrival of Steam China will eventually lead the government to ban the original Steam in China, cutting them off from a vital source of games that the rest of the world can play.

Valve officially signs with Shanghai’s government to launch Steam China in Shanghai. (Picture: Weibo)

Countless PUBG clones flood the market (and then fizzle out)

This year’s hot genre? Battle royale. To cater to Chinese gamers -- the majority of which are mobile gamers -- Chinese companies rolled out a ton of PUBG clones on smartphones.

There’s Knives Out, Rules of Survival, Xiaomi Gunfight and many, many more. They gained popularity by being some of the first battle royale games on mobile, attracting tens of millions of players. But that advantage could only last so long -- after Tencent made the official PUBG Mobile and Epic launched the mobile version of Fortnite, their popularity fizzled.

Blizzard to develop mobile game Diablo Immortal with NetEase

Diablo Immortal has become perhaps the world’s most hated game in 2018 soon after the project was unveiled at Blizzcon. In November, Blizzard announced that the next installment of the Diablo franchise, one of the most beloved PC game franchises of all time, will be a mobile game co-developed with Chinese company NetEase.

Blizzard immediately faced a huge backlash as gamers accused Diablo Immortal, as it appears in the trailer, to resemble some of NetEase’s existing mobile titles. Many western gamers are not huge fans of NetEase’s mobile games, which drove them to resent Blizzard for its decision.

Diablo Immortal’s two trailers have been viewed about 7.8 million times on YouTube, with about 95% viewers disliking them. (Picture: Blizzard)

The backlash from Western gamers towards NetEase comes at an interesting time, too: In June, the Beijing-based company said that it’s pumping US$100 million into Halo creator Bungie to create a brand new franchise, the company’s first since Destiny.

Monster Hunter: World pulled from Tencent’s WeGame

Monster Hunter: World was one of the hottest PC games in the first half of 2018. Tencent was looking to give its digital game store WeGame a boost by landing the title ahead of Steam, and it seemed to work: The game received more than one million pre-orders on WeGame.

But the game was pulled from WeGame just days after launch. Tencent said the game had to be removed because government authorities received “numerous” complaints about its content. While Tencent did offer gamers refunds for the game, many refused to accept refunds as a sign of support for their attempt to introduce a hit foreign game to China, a country which often receives only a fraction of games from abroad that the rest of the world gets.