Shares in Nintendo soared 14% in Tokyo on Friday after China opened the door to sales of the company’s popular Switch console.
Authorities in the Chinese province of Guangdong have granted internet giant Tencent (TCEHY) preliminary approval to distribute the Switch, giving Nintendo greater access to the world’s biggest video games market.
Tencent has also won approval to sell a game from Nintendo’s Super Mario Bros. franchise.
Nintendo’s portable Switch is not currently on sale in China through official channels.
Gamers only have limited access to imported consoles through the so-called grey market, which includes some online vendors on Alibaba (BABA)’s Tmall platform. But these can be expensive.
The approval from Guangdong officials is subject to public consultation, but it could signal a new approach to console sales in a major gaming market.
According to market research firm Newzoo, revenue from China’s video games market reached $38 billion in 2018.
Investors hope “Nintendo can build a meaningful business” in the country, said Serkan Toto, founder of Tokyo-based consultancy Kantan Games.
The prospect of Nintendo partnering with Tencent to bring franchises like Super Mario Bros. and Pokemon to China’s huge mobile gaming market is mouth-watering for investors, he added.
“Nintendo sits on the gaming world’s most valuable and unique [intellectual property] treasure trove, and it can unlock it now for Chinese users,” said Toto.
A Nintendo (NTDOF) spokesman declined to comment on the company’s plans for the Chinese market.
China’s video games market is not without its risks. Regulators in the country froze new approvals of smartphone games for nine months last year, in a move that hammered Tencent’s stock price.
The freeze reflected an increasingly restrictive environment for the gaming industry.
In August, China’s Ministry of Education announced plans for new rules to control the number of games and limit the time children spend playing them.
The Switch system has helped reinvigorate Nintendo, which was founded 129 years ago in Kyoto.
Blockbuster sales of the hybrid gaming console, which allows users to play on the go and at home, have helped drive up the company’s profits and stock price.
But there are recent signs that demand has been waning. In February, Nintendo slashed its target for annual Switch sales from 20 million to 17 million.
Yong Xiong and MIchelle Toh contributed to this report.