Chinese authorities come calling on Microsoft as game ban gets lifted

By Eunice Yoon and Arjun Kharpal
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Microsoft confirmed on Monday that Chinese government officials have visited their offices in cities across China.

Local Chinese media reported that officers from the State Administration for Industry and Commerce visited the U.S. software giant in Beijing, Shanghai, Guangzhou, and Chengdu. A Microsoft spokesperson issued a statement, saying the company is happy to answer the government's questions. A reason for the inspections was not immediately clear, though the move coincides with the lifting of a ban on foreign game consoles that has lasted more than a decade.

The visits come as American tech companies have seen their businesses under pressure after the U.S. accused Chinese military officers of cybertheft. A source of speculation is that the company is under scrutiny for antitrust or pricing issues, since the authorities reportedly visiting Microsoft's facilities were from the industry and commerce division of the government.

Game on for Microsoft

As China's regulators look into the software giant's operations, Microsoft is attempting to pry its way into the country's fledgling foreign console market. The Xbox One became the first to hit the Chinese market following a 13-year ban, and e-commerce giant began accepting pre-orders for the device on Monday.

The Chinese government originally banned foreign consoles in 2000, citing concerns that violent games could have a detrimental effect on the mental health of young people. In January, however, the ban was lifted to allow consoles to be sold in the new Shanghai free-trade zone.

Consumers will be able to place orders for the console through Tencent's WeChat, known as Weixin in China, and QQ messaging service. Tencent holds a 15 percent stake in did not disclose the price of the console, but said consumers would be able to reserve the new Xbox with a 499 yuan ($81) deposit. Gamers will also be able to buy the console through China Telecom later this year.

"Launching Xbox One sales in China through's Weixin and Mobile QQ entry points underscores the strength of these platforms with young and sophisticated Chinese consumers," Shuang Du, vice President of in charge of the IT and digital business unit, said in a press release.

China has had a thriving video game "grey market" in which consoles such as Sony's PlayStation range and Microsoft's Xbox series were sold illegally. Gamers in the world's second largest economy have been brought up on a diet of PC games which makes up two thirds of the revenues generated in the country's gaming market.

This legacy in China's $12.3 billion dollar gaming market, might see Xbox struggle to make its mark on the scene, analysts said.

"I think first mover advantage gives Xbox some worthy benefit but I don't expect the launch and the early months of the console to see significant sales," Piers Harding-Rolls, head of games at IHS, told CNBC in a phone interview.

"The backdrop of the market is that it's dominated by PC gamers and mobile gamers," Rolls-Harding said. "Entering that market where you've got a burgeoning mobile and tablet game opportunities and entrenched PC game usage is unlike any market that consoles would have entered into before."

On top of the difficulty of changing the mindset of Chinese consumers, game makers are likely to face stiff regulation of content as well as the possibility that users might not connect with storylines or characters.

"The games on Xbox are very catered towards western interest," Heloise Thomson, gaming analyst at Enders Analysis, told CNBC in a phone interview.

"The characters, the enemies, the clichés are very different to what Chinese consumers will be used to."

Tencent's move is largely seen as an attempt to take on the dominance of Alibaba in the e-commrce space.

By CNBC's Eunice Yoon and Arjun Kharpal