Last week, China's online gaming revenue was reported to be through the roof, despite WoW's rough re-launch. But two Chinese government agencies are stirring up trouble, leaving empty-handed fans in their wake.

When it comes to Asia, the video game industry is absolutely huge. Here in the U.S., you can't walk into kid's bedroom without seeing at least one toy or comic book based on an Asian video game property. In a similar fashion to Japan's widespread video game export of the late 80s and early 90s, the last decade has seen China and South Korea climb their way to the top of the MMO industry.

Business in China, specifically, is booming right now. Whether it's revenue coming in from monthly subscriptions, micro-transactions or the ubiquitous virtual currency like Q Coins, China's online gaming industry raked in almost $1 billion USD its second quarter, a 39.5 percent increase from last year's earnings. In total, China's online gaming industry expects to earn up to 27 billion yuan, or $4.0 billion USD, by the end of its fiscal year, according to GamePolitics.

Despite all that success, the PRC is dealing with some serious issues, both inside and out of its borders. There's a civil war going on between two of China's government agencies; both locked in a power struggle for control over regulatory duties, leaving fans of MMOs like World of Warcraft caught in the crossfire. The country's strict censorship doesn't appear to be loosening anytime soon, either, making it more difficult for even the most mild-mannered games to get into the hands of Chinese gamers.

Veteran MMO fans know exactly how popular their favorite video game genre is in the East. Newcomers to the scene might notice games like Aion was originally developed by NCSoft East in South Korea long before its recent U.S. launch. The localization of Asian MMOs to North America and Europe has been going on for years, however; MMOs such as Perfect World International, MapleStory, Lineage II, Rappelz and many, many more began in South Korea and China before making their way to the Western world.

It's worth noting that, despite China's massive population in comparison to South Korea, a seemingly disproportionate number of MMOs were originally developed out of the latter, before moving into China on the way to the U.S. Suffice it to say that, although China's censorship probably has a hand in this fact, it's a debate for another day. Regardless of which Asian country these MMOs were originally developed in, most of them eventually make their way into China's gigantic pool of gamers. Whether they stay in the hands of Chinese fans or not is a different story.

In the PRC's latest round of crackdowns, the government slammed the censorship hammer down on at least 45 online games last week, according to Yahoo. According to the government, the games "encouraged players to engage in illegal activities such as drug trafficking and prostitution," as quoted in the article. Granted, most of these games were probably browser-based games like Torn, which we wrote about recently.

However, this latest example is just one of many similar crackdowns, all belonging to larger censorship campaigns—the latest began on October 1, the 60th anniversary of the founding of China's communist government.

An earlier campaign banned online games featuring references to organized crime, like the Mafia, while others targeted a broader range of online games due to their lack of government-approved ratings. Perhaps most infamous among MMO fans is Blizzard's repeated hurtles in offering World of Warcraft to Chinese citizens; initially, the developers had to develop a "censored version" of the game to legally publish it in mainland China. This version couldn't show blood, bones, skeletons and other things considered socially taboo or offensive by the PRC.

Western players might assume that, as we move ahead into the future, such seemingly-antiquated censorship laws would begin to relax. Unfortunately for Chinese gamers, though, things seem to be getting worse. (But at least the government finally stopped using shock-therapy to "rehabilitate" video game addicts!)

Every Chinese WoW player will remember that fateful day when Blizzard's Chinese publisher/operator, The 9th City, pulled the plug on World of Warcraft, leaving millions of players in the dark. This time, though, it was Blizzard which had chosen not to renew its contract with The 9th City, opting to switch to a new China-based operator called NetEase. The problem is that Blizzard didn't foresee all the problems that would arise when they tried to re-launch WoW in China with its newest expansion, Wrath of the Lich King. During the game's downtime, Blizzard began receiving interference from two fronts in the Chinese government; stricter censorship and tighter business regulation.

When Blizzard finally tried to release Wrath of the Lich King in China, it encountered more censorship roadblocks than it did back in 2007, with The Burning Crusade. On the business front, Blizzard had a hell of a time dealing with China's General Administration of Press and Publication (GAPP), due to the PRC's regulations regarding foreign companies operating online games on domestic soil. The PRC even launched an investigation after it suspected Blizzard of entering into an illegal joint business venture with NetEase.

In July, GAPP finally gave Blizzard and NetEase permission to re-launch, starting with a small-scale test. As reported by WoW.com last month, things are finally up-and-running now; the WoW servers are online for Chinese players, although the fate of Wrath of the Lich King is still unknown.

As WoW.com pointed out in a separate article a few days prior to the re-launch, the real reasons for the delay and other problems may have been politically-charged. The WTO and the Chinese government haven't exactly seen eye-to-eye throughout the past few months, specifically regarding the PRC's censorship rights for imported media. Sure, the whole Blizzard/NetEase fiasco might revolve solely around money. But as some reporters speculate, it could be a political pissing match, as well. Or it could just be good old-fashioned, isolationist, protectionist communism in action.

To complicate matters even more, infighting between two of the PRC's regulatory agencies is resulting in a power struggle, with gamers caught in the middle. An article at ProvocativeInvestors reports GAPP is squaring off against China's Ministry of Culture in a battle for control of the country's online gaming industry (via WoW.com). According to the article, GAPP issued a statement last Friday, claiming "foreign companies are not allowed to operate online games in China in any form." According to the article, this statement was released just a month after "supervisory power of the online gaming industry was taken away from GAPP and given to the Ministry of Culture."

Supposedly, GAPP still holds the power to issue licenses to all commercial websites within China's borders, so the issue might come down to the difference between Web-based online games, and traditional PC "online games" like WoW. Consider the following quote from the same article:

GAPP's reiteration over the weekend that foreign companies are not allowed to operate online games in China - a law not enforced strictly while GAPP was supervising - is being seen by analysts an attempt to regain some of its authority over and interest in the fast-growing industry.

"The new rule is a good beginning in approving the online games in accordance with laws and will be conducive to the regulation of the online gaming businesses," said Kou Xiaowei, vice director of GAPP's technological and digital department.

According to the English-language Shanghai Daily, GAPP has already started a crackdown on "online games operating illegally and featuring unhealthy content". As of last Thursday, more than 200 online games had been investigated and 45 overseas online games banned, the newspaper reported.

The fact that GAPP is going after what seems to be Web-based online games, as mentioned earlier, reinforces the idea that the majority of MMOs as we know them—like WoW, EverQuest and Aion—are exempt from at least some aspects of GAPP's oversight.

On the flipside, the vice director of Ministry of Culture's Market Department—which is supposed to have supervisory power over online gaming now—was "startled to hear this news," according to the story. Apparently, he doesn't feel that GAPP's statement is "in spirit" with both departments' governing body, the Establishment Committee of the Central Organization.

It's a safe bet that China's online gaming industry is ultimately secure, even though it faces continual beat-downs with the censor stick. It is, after all, a multi-billion dollar industry. With that much dough on the line, there's no doubt the PRC will grin and bear it, especially for cash-cows like World of Warcraft.