- [In big sister site Gamasutra's latest 'China Angle' column, Frank Yu examines the evolving business model for Chinese games, creating games that are "...designed like fast-moving consumer goods, trendy fashion items, and in some cases, like drugs." Is government intervention a good thing here?]

The Olympics are over and life is returning to semi-normality to Beijing and China, if you count another earthquake and the Para-Olympics normal.

In a reminder of when the term 'China Games' did not mean the Olympics, a Committee of China’s National People’s Congress this week has classified games that depict too much violence, porn or not enough Chinese patriotism as being “unhealthy.”

The committee recommends more monitoring and even automatic log off when players reach a certain time allotment.

From a recent report:

"Li Jianguo, vice-chairman of the National People’s Congress said that Internet-addicted teenagers account for about 10 percent of China’s web users. With more than 200 million Internet users in China, that’s millions of "unhealthy" young Chinese and a huge business for "unhealthy" game developers."

Ten percent of anything in China is a huge number, and will no doubt continue to rise along with government intervention. For many developers in the West, this sort of government regulation and oversight of the industry seems both odious and intrusive. I thought so too -- but now I’m not so sure.

After seeing the business models and game design of the current crop of Chinese online games, I would have to agree that the industry in China is heading towards games designed to be addictive and to essentially suck the consumer money out as quickly and efficiently as possible.

I am a bit torn by this, as a believer that game designers are like artists and need to express themselves. The current business situation for games in China requires that games be designed like fast-moving consumer goods, trendy fashion items, and in some cases, like drugs.

Due to piracy and the lack of a PC retail game market (and a lack of consoles), the free-to-play model has become the dominant model for game companies in China in the last 5 years.

Many games can be played with a free download or a free registration on the web. Some sites rely on traffic and advertising to make their money, but most games now rely on the sale of virtual items and special access in order to make their revenue and growth targets.

Limited items, power-ups, special events, and seasonal gifts are the fuel that powers the Chinese game industry. For games like Zhengtu Online or Tencent’s "skill-based" gaming, there are elements of gambling, wagering and lottery within the games that border on legality since winnings cannot be transferred back into cash, although it does take real money to take a chance.

Many of these games are designed to be easy for new users and curious players. Once they get sucked in through fast leveling or the network effect of their friends playing as well, players need to invest in special items and more time in order to reach ever-higher levels and challenges.

Although this is common for most MMORPGs even in the West, the nature of free-to-play means that, without recurring monthly subscriber revenue or up-front game purchase, free players need to be both emotionally invested in the game and their characters to make the all-important conversion into virtual item-purchasing customers and recoup the cost and investment of initial free-to-play.

Unlike traditional notions of video games with a conclusion or even a winner, Chinese online games do not end -- they just continue on to the next challenge and ever more virtual item purchases. In the Western climate, there are other alternative games, platforms and experiences that the gaming public can choose from.

Yes, there are advanced casual game portals where dancing, racing or sports games have a definitive winner, but in most cases, players still need to purchase more items, accessories or new levels.

Winning - or gaining power - in online games in China is as much about purchasing items as it is about skill or hard work. This is the reality of the business of games in China, so the designers and developers need to make their games based on this strategy.

It's not evil, it's business.

If designers and developers had other business alternatives to monetize their games, they would if they could. For now, they design the games to painlessly help users spend ever larger sums of money on virtual items. I’m sure Western publishers are looking at and exploring this model as well.

That is why government intervention in the industry is not, offhand, a bad thing. The challenge is if the government can regulate this industry without stifling further evolution, or worse. Regulations may lead to the heavy-handed restrictions that merely solidify the base of the large profitable companies that can comply more easily and stamp out newer, younger startup competition.

Instead of focusing on the content of the games, the regulators need to focus on the industry's business model. With some trepidation, the Chinese game industry has crossed a line somewhere where the gaming experience model is not based on fun, but a psychological and social compulsion to play.

Among cases where regulation of an industry is needed, this may be the one where the market cannot or will not correct itself.

[Frank Yu is an founding advisor to Cineo. Prior to his current position, Frank started and led the first China game team for Microsoft Casual Games. He has also served as the first Regional Business Manager in Asia for the Xbox and Home Entertainment Division. He can be reached by email at capital@gmail.com.]