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China reportedly closed over 12,000 Internet bars in 2004. China Daily writes:

The government closed 12,575 Internet bars, 2,861 dance clubs, 3,434 video halls and 131,481 snack counters.

From October to December in 2004, eight ministries including the Ministry of Education, Ministry of Public Security and the Ministry of Justice, launched a nationwide campaign to close these illegal businesses, which were mainly located nearby primary schools and middle schools.

According to the ministries, Chinese parents had complained that the businesses had "severely affected students' cultural lives."

During the time, public security organs at all levels also cracked 5,926 criminal cases relating to the safety of students and teachers and made more than 200,000 arrests.

The China Stock Blog comments on this that "investors in Shanda Interactive (ticker: SNDA) and Netease (ticker: NTES) need not be concerned about a drop-off in gaming revenues", and elaborates on the reasons why.

SNDA and NTES charts below.
Snda

Ntes_2

Source: China Internet clamp-down shouldn't impact Shanda, Netease