Unveiling the Magic of ‘Dream Factory’: The Fascinating Story Behind China’s Gaming Sensation

700 meters east of the Shanghai Caohejing Development Zone subway station, the newly opened China Audio-Video and Digital Publishing Association Game Museum is “Danyanlujing”. This largest game museum in China covers an area of ​​2,000 square meters and displays more than 1,000 core exhibits, vividly restoring the “past and present” of games with important objects in the history of game development.

Walking along Yishan Road where the Game Museum is located, the buildings of game companies such as Mihoyo, Lilith, and Youzu come into view. There are more than 100 game companies of all sizes gathered near Yishan Road, including many legends in the game industry. Xuhui Caohejing Park is jokingly called the “universe center” of domestic games. Even if you are not a game enthusiast, you can clearly feel the vibrant atmosphere of the game industry here.

The 2023 China Game Industry Report released by the China Audio-Video and Digital Publishing Association’s Game Working Committee shows that in 2023, my country’s game sales revenue will exceed 300 billion yuan for the first time, reaching 302.964 billion yuan, and the user scale will grow to 668 million people. Among them, Shanghai’s game sales revenue reached 144.528 billion yuan, accounting for nearly half of the national total. The Xuhui District game industry revenue is nearly 75 billion yuan, accounting for almost half of Shanghai’s game industry.

“Look to Shanghai for Chinese games, and look to Xuhui for Shanghai games.” As an important growth pole in the Chinese game landscape, the rise of Xuhui’s game industry is also a microcosm of the development of Chinese games.

Enterprise agglomeration and industry rise

What does Xuhui mean to game practitioners?

With the popularization of the Internet, the era of domestic online games began, and the Shanghai game industry immediately entered a period of rapid start-up and growth. At the end of 2004, Shi Yuzhu chose to establish Shanghai Zhengtu Network, the predecessor of Giant Network, in Xuhui. Unlike previous game companies that represented overseas games, Zhengtu chose to develop its own games. In 2006, its first MMORPG (Massive Multiplayer Online Role Playing) game, Zhengtu, began public testing. On the day of the public testing, the maximum number of simultaneous online users exceeded 200,000. Two years later, this number exceeded 2 million, becoming China’s first self-developed online game.

In the first decade of the 21st century, the multinational game company Ubisoft entered China and its first stop was Xuhui. Leading companies Tencent Games and NetEase Games established Shanghai companies in Xuhui, and “old brands” such as Giant, Youzu, and Kaiying took root in Xuhui and gradually entered the national market. The large number of game talents gathered in Xuhui has made Shanghai a major center of China’s game industry.

At that time, people had not thought that this wave of industry gathering would make Xuhui the brightest pearl of China’s game industry. After 2010, with the rise of smartphones, the mobile game industry ushered in an explosive period. With the explosion of games such as “Honor of Kings” and “Onmyoji”, domestic mobile games gradually dominated the domestic market, and independent game development teams continued to emerge.

During this period, a new generation of game companies such as Mihoyo, Lilith, and Hypergryph were born in Xuhui, and together with Papergames, which is also in Shanghai, they are commonly known as Shanghai Game F4. The phenomenal mobile games they launched, such as “Genshin Impact”, “Rise of Kingdoms”, and “Arknights”, put Xuhui in the spotlight again in the new mobile game track.

In 2023, mobile game revenue will account for nearly 50% of the global game market. Three of the top four companies in the global mobile game market distribution revenue are from China, namely Tencent, NetEase and MiHoYo. Tencent and NetEase are both located in Xuhui District, and MiHoYo is a “native” Xuhui company.

Innovation never stops, dreams never cease

Earlier this year, Data.ai, an artificial intelligence data aggregation company, released a list of the “Top 50 Global Publishers in 2024” based on user spending. Mihoyo, Lilith, Yostar and other companies were all on the list, becoming the benchmark for Chinese games to go global. They are all located in Xuhui District.

Today, Xuhui District has gathered game companies including Tencent, NetEase, Youzu, Giant, Mihoyo, Lilith and Yostar, which are leading the way in different game categories. On Yishan Road in Caohejing Development Zone, game companies of all sizes occupy more than 300,000 square meters of office space, with more than 20,000 employees.

Last year, the structures of Tencent’s East China headquarters building and NetEase’s Shanghai West Bund R&D center in Xuhui Riverside were completed, while miHoYo acquired a plot of land in the core area of ​​Caohejing for RMB 1.0772 billion, injecting new impetus into the development of the game in Xuhui.

As the market trend changes, and Xuhui’s support policy for game companies continues to expand, the funding targets have gradually expanded from mobile games to console games, mini-games and other diversified categories, and then expanded to game and e-sports companies in the research and development and application of software technologies such as game development tools, virtual reality, artificial intelligence, and blockchain. In the past two years, established companies such as Giant and Kaiying have begun to transform into mini-games and other tracks. In 2024, Giant’s “Primitive Journey” ranked in the top ten of the WeChat mini-game best-selling list, and the company also officially completed the filing of the game AI big model GiantGPT, becoming the first company in the game industry to file an AI big model; Kaiying earned the first pot of gold in the mini-game market with “Chinese Paladin: A New Beginning” and successfully “went overseas”, finding new growth power through bold exploration.

The new generation of enterprises also focus on R&D and “going global”. R&D personnel account for about 70% of the total personnel of Mihoyo and other companies. Lilith and Hypergryph have established headquarters or branches overseas. As one of the first national cultural export bases, Xuhui District has 16 national cultural export key enterprises and 13 key projects in the base from 2019 to 2024.

As the backbone of Xuhui’s game industry, these companies support Shanghai’s undisputed first-tier game industry city status. It can be said that Xuhui District’s game industry has constructed the strategic pattern of China’s current game industry in different development stages and fields.

Government and enterprises work together to achieve the same goal

In April this year, seven departments in Xuhui District took the lead and key game companies in the district initiated an invitation to game companies and third-party professional service agencies across the country to jointly establish a game company copyright protection alliance to provide strong guarantees for member units and the overall development of the industry.

The rule of law is the best business environment. The vigorous development of Xuhui’s gaming industry is inseparable from the continuous optimization of the regional business environment.

In 2022, the “Opinions on Supporting the Development of Cultural and Creative Industries in Xuhui District” and the “Guidelines for Data Standardization of Online Game Enterprises” were officially released. Dozens of game companies received support and grew during this period. In addition to conventional financial support, Xuhui District has innovatively launched many “government-enterprise cooperation” initiatives to encourage companies to build IPs and extend the value chain, and create diversified experiences for new cultural and tourism consumption scenarios. For example, Xuhui District cooperated with game companies such as Tencent, miHoYo, Eagle Point, Lilith, and Le Elements to combine game characters with street installations and cultural and tourism resources. As a star promoter, it promoted various public and public welfare activities in Xuhui District and launched peripheral products such as the “Xuhui×miHoYo” joint travel map and fire education four-frame comics. Music performances and carnival activities held by miHoYo, Eagle Point, Manju and other companies also boosted offline consumption. By joining hands with different types of commercial carriers in the district, Xuhui has given game companies’ IPs a richer landing scene, turning online “traffic” into offline “retention”.

As the game industry matures, Chinese games have also given traditional culture a new era of innovative expression, successfully activated a new path for traditional cultural narrative, and made traditional culture “trendy”. The first game under Fun Orange, “Returning Dragon Tide”, was publicly tested this month. The game has a strong oriental style. For example, the Chaofeng District in the game refers to the Shikumen architectural style, and the key characters speak authentic Shanghainese. The number of downloads exceeded 6 million 5 days after it was launched. During the Mid-Autumn Festival, at the Tang Yun Mid-Autumn Festival event of the 2024 Shanghai Tourism Festival in Xuhui District, “Returning Dragon Tide” also presented a unique performance in the “Autumn River Tower Shadow” in Longhua Square. “Jiangnan Hundred Scenes”, which became “popular overnight” by Coconut Island Games, contains many iconic ancient buildings such as Shanghai Longhua Tower and Cangcheng, and is linked offline with the century-old brand Duoyunxuan, etc., presenting the “Four Masters of Wumen” theme exhibition with Duoyunxuan’s rich collections and calligraphy and painting scenes, so that players can feel like they are in a Jiangnan painting studio, see the art works created by game characters in reality, and appreciate the unique charm of Jiangnan culture. As high-quality products with oriental national trend content symbols, these game works play the role of cultural communication carriers, and traditional culture also gives the game works lasting vitality.

Seize the opportunity and plan for the future together

The popularity of Return of the Dragon symbolizes the rise of a new group of new forces in the gaming industry. Xuhui District’s support policies for the gaming industry are also following the trend and taking advantage of the momentum.

Earlier this year, Xuhui District issued the “2024 Xuhui District Support for Game and E-sports Project Application Guidelines”, providing more support funds for high-quality enterprises. In July, the China Audio-Video and Digital Publishing Association, together with the Xuhui District Government and other units, established a game industry research expert committee to provide all-round services to promote the development of the game industry.

With the continuous gathering of enterprises, the Caohejing Development Zone, whose stock space is close to saturation, has launched an urban renewal stock redevelopment project with a scale of over 100,000 square meters, and is also studying the creation of a 1.3 million square meter “Caohejing Yuanchuang Future Center”.

As an important part of the “Caohejing Yuanchuang Future Center”, the Beiyang Artificial Intelligence Innovation Center, located in Huajing Town, Xuhui, known as the “Southern Center”, will welcome project delivery this year. This “AI Town” with a total construction area of ​​1.15 million square meters and a total investment of 17.1 billion yuan, has supporting facilities including Grade A office buildings, courtyard garden office buildings, supporting residences, primary schools and kindergartens, etc., in order to attract more talents. At present, Mihoyo, Youka Network, etc. have confirmed to move into the Beiyang Artificial Intelligence Innovation Center. In a more competitive market environment, Xuhui is once again at the forefront of change.

As one of the most popular cultural industries in the world, the positive value of the game industry has gradually emerged over the past 20 years, the policy environment has become more stable, and all sectors of society have paid more and more attention to the game industry. The industry is taking off at the right time. To build a communication and cooperation platform for industrial development, the 2024 Digital Cultural Industry High-Quality Development Conference with the theme of “New Digital Entertainment Ecology and New Cultural Future” is planned to be held in Xuhui District, Shanghai on September 27, hosted by the Xuhui District People’s Government of Shanghai, Shanghai Branch of Xinhua News Agency, Xinhua News Agency China Economic Information Service, Xinhua Publishing House, and Shanghai Lingang Group, to help the stable and healthy development of the game industry.

(Source: Xinhua Finance)

Source: Xinhua Finance

Original title: How was China’s game “Dream Factory” created? Shanghai Xuhui has the answer

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