The Chinese video game industry, valued at $36 billion in 2022, has experienced significant shifts in recent years, most notably during the COVID-19 pandemic. As the pandemic swept the world, the Chinese government imposed strict zero-COVID policies, confining people to their homes. This period saw a surge in demand for video games, with people seeking entertainment and social interaction in virtual worlds. However, a sudden change occurred last December when the government lifted COVID restrictions, leading to a downturn in the industry.
Navigating business slowdown
Facing a decline in business, industry leaders like Zhu Bolong began exploring innovative solutions to adapt to the changing landscape. Zhu, the CEO of a video game design company, recognized the need to improve efficiency and reduce costs without compromising the quality of their work. Traditional cost-cutting measures, such as staff layoffs, were considered but deemed unfavorable for progress.
In response to the challenges posed by the shifting market, Zhu and his team turned to generative artificial intelligence (AI) tools as a potential game-changer. The results were astonishing – AI-generated images proved to be of remarkable quality, surprising the staff with their accuracy and speed of creation.
The emergence of AI in China’s video game sector
The video game industry in China has been at the forefront of adopting generative AI, making it the first industry to experience its effects. While the sector faced its share of hurdles in recent years, including government concerns about video game addiction, it remains a robust $36 billion industry. Regulatory challenges, including a halt on game approvals in 2018 and 2021 and restrictions on online playtime for schoolchildren, have impacted the sector. Additionally, the broader economic recovery in China has been slower than anticipated.
A Shift towards educational products
Zhu Bolong is leading the way in adapting to these changes by pivoting his business strategy. He is transitioning to selling dance videos as educational products directly to streaming platforms, aiming to expedite their production. To facilitate this shift, Zhu invested in a powerful computer capable of running AI tools. The head animator of his company, Li Guo, showcased the power of AI by producing an animation using search terms, images, and a hand sketch. What once took 20 days to achieve could now be accomplished within minutes.
AI as an enhancer of creativity
Li Guo, the head animator, sees AI tools as a complementary force that enhances his creative skills rather than replacing them. He acknowledges that certain jobs may disappear due to generative AI but believes that truly creative positions will remain intact. Notably, there is less resistance to AI adoption in China compared to the United States, driven by China’s highly competitive job market, where skill enhancement is seen as a path to success.
Impact on employment in the industry
While concerns about job losses in the video gaming sector due to AI have been raised, industry insiders like Kimi Shen, the owner of a software tools company for mini video game creation, suggest that these fears may be overstated. Shen points out that layoffs are more likely a result of the sluggish economy rather than AI adoption. China’s unemployment rate has hovered between 5% and 6% since the pandemic, with one in five new graduates struggling to secure employment.
Shen emphasizes that AI tools cannot fully replace human talent in his field at present. One significant challenge is the issue of continuity, where AI struggles to maintain consistency across multiple scenes or iterations. For instance, creating a character and using it across ten scenes may still require a human illustrator to make adjustments. Shen envisions generative AI tools serving as “co-pilots” to human animators and illustrators, enhancing their capabilities rather than replacing them.
AI’s potential beyond animation
Zhu Bolong remains optimistic about AI’s potential to address other aspects of his business, such as music. He candidly admits to using copyrighted songs in his games without proper licensing, leading to legal challenges and higher music royalty fees. However, he hopes that generative AI could eventually compose music for his company, helping to reduce costs and navigate the complexities of copyright laws.
The Chinese video game industry, faced with the challenges of shifting government regulations and a post-pandemic landscape, is turning to generative AI as a tool to improve efficiency and cut costs. While concerns about job displacement exist, many industry experts see AI as a valuable enhancer of creativity and productivity, rather than a threat to employment. This innovative approach reflects the resilience and adaptability of China’s dynamic video game sector.
