Giant Network, the long-standing gaming titan founded by the idiosyncratic billionaire Shi Yuzhu, finds itself navigating a striking paradox. While the company is currently riding a wave of unprecedented financial success driven by a new hit title, Chinese regulators have reached back five years to penalize the firm for corporate governance failures. The Chongqing Securities Regulatory Bureau recently issued warning letters to Giant Network, Shi Yuzhu, and several key executives over an undisclosed related-party transaction dating back to 2020.
The regulatory scrutiny centers on the 2020 divestment of Hefei Lingxi Interaction Network Technology. Investigation revealed that the funds used by the purchaser, Shanghai Zhuoxian, were ultimately sourced from parties related to Giant Network itself. By failing to disclose this circular funding arrangement, the company bypassed mandatory review and disclosure protocols for related-party transactions, effectively obfuscating the true nature of the deal from shareholders and the market.
While the administrative penalty—a formal warning letter and an entry into the securities market’s 'integrity archives'—is more of a reputational sting than a financial blow, it underscores the tightening noose of Chinese market oversight. Regulators are increasingly unwilling to overlook historical discrepancies, signaling that even the most successful tech veterans like Shi Yuzhu must adhere to modern transparency standards. The 'integrity archive' serves as a persistent black mark that can complicate future capital raises and corporate maneuvers in the domestic A-share market.
Yet, this regulatory friction contrasts sharply with Giant Network's stellar operational performance. The company’s 2025 revenue surged over 72%, while its first-quarter 2026 figures show a staggering 221.7% increase in revenue to 2.33 billion RMB. This explosive growth is almost entirely credited to the blockbuster success of 'Supernatural Action Team,' a game that has captured a massive audience with over 200 million registered users and daily active users exceeding 10 million.
The duality of Giant Network’s current situation reflects a broader trend in the Chinese tech sector: the collision of old-school entrepreneurial 'gray zones' with a new era of strict regulatory enforcement. As the company transitions from its legacy portfolio to high-growth modern hits, it is being forced to settle its historical accounts. For investors, the question remains whether the massive cash flows from new IP can sufficiently offset the risks associated with the firm's historically opaque governance style.