Genshin Impact: From Creative Economy to Governance — A Critical Reflection on Why Nations Fail
This essay explores the intersection of creative economy, governance structures, and institutional theories by analyzing Genshin Impact as a case study, while critically engaging with Acemoglu and Robinson’s Why Nations Fail. We argue that cultural outputs, such as video games, are not merely economic phenomena but also reflections of deeper governance systems and geopolitical realities. By comparing Japan, South Korea, and China, the essay examines how different governance models influence the creative industries and shape broader cultural trends. Japan’s risk-taking and philosophical depth, Korea’s balance between commercial success and geopolitical constraints, and China’s calibrated creativity under state control reveal distinct trajectories of governance and cultural production. This analysis critiques the overgeneralization of institutional success based solely on democratic ideals, highlighting instead the diverse pathways to societal sustainability. The study emphasizes the need for a positive, non-normative view of governance, acknowledging that varying political systems, from liberal democracies to strong states, can yield success depending on the historical and geopolitical context.
Introductory
Genshin Impact, the wildly popular action role-playing game developed by Chinese studio miHoYo, recently unveiled its much-anticipated 5.1 patch, expanding its immersive world with the introduction of Natlan, the land of fire, and its Pyro Archon. The game, which revolves around a complex narrative of seven elemental archons and their respective lands, has captivated a global audience since its debut in 2020. With each new patch, Genshin Impact deepens its lore while continuing to dominate the gaming landscape with unprecedented revenue figures and widespread international appeal.
What makes Genshin Impact’s success particularly remarkable is the scale of its earnings. Individual characters, released as part of its gacha-based monetization system, have generated over ten million USD in sales within days of their introduction. This “gacha” mechanic, coupled with a free-to-play model, has set the game apart in an industry still grappling with the balance between monetization and user experience. It also places Genshin Impact in stark contrast with earlier successes in the MMORPG space, such as South Korea’s Ragnarok Online, which popularized subscription-based revenue models in the early 2000s. In today’s market, Genshin Impact has overshadowed those older paradigms with a more flexible and engaging economic structure that appeals to a broader audience.
MiHoYo, a company headquartered in Shanghai, deftly operates in the highly competitive and regulated space of Chinese tech companies while simultaneously achieving a global reach. The game’s international success is reflected in its massive player base across regions including North America, Europe, and Southeast Asia, cementing China’s rising influence in the global gaming industry. Genshin Impact’s ongoing success reflects not just a mastery of the gaming formula but also a deep understanding of global consumer behavior, something that has eluded many other Chinese developers whose products have struggled to find footing outside of the domestic market.
However, the overwhelming success of Genshin Impact is also a reflection of a more complex undercurrent, one where cultural and political contexts play a pivotal role. MiHoYo, despite its global achievements, operates within the confines of China’s strict regulatory environment. Subtle changes, such as costume modifications for characters like Jean and Rosaria, mandated by Chinese authorities for the domestic version of the game, signal the government’s quiet but firm control over even the most globally successful enterprises. These seemingly minor adjustments are indicative of a much larger dynamic in which Chinese companies, regardless of their international influence, remain beholden to state oversight and the ideological expectations set by the Chinese Communist Party (CCP).
At the core of this dynamic lies a delicate balancing act. MiHoYo’s developers have demonstrated their capacity to create a product with global appeal, but they must do so while navigating the complex boundaries of what is acceptable in China’s tightly controlled cultural environment. The CCP’s oversight over the content produced by Chinese companies extends beyond mere economic regulation — it involves moral and ideological control, as seen in the enforced changes to character costumes and the broader push to align entertainment with state-sanctioned values.
China, Korea, and Japan: Distinct Approaches to Gaming and Cultural Export
While Genshin Impact represents a clear triumph for China’s global gaming aspirations, it is essential to understand how its success reflects broader shifts in the creative industries across East Asia, particularly in comparison to South Korea and Japan. Each of these countries has developed distinct preferences and strategies that shape their global cultural output, especially in the realm of gaming, but also more broadly in anime, manga, and other media forms.
Ragnarok Online (RO), a massively multiplayer online role-playing game (MMORPG) developed by South Korean studio Gravity in the early 2000s, once stood as a titan in the gaming world. Its blend of a subscription-based model and 2.5D graphics created a dedicated fanbase that extended across borders. However, despite its enduring nostalgia, RO has faded in relevance compared to newer games like Genshin Impact. Part of this decline can be traced to the evolving expectations of gamers and how South Korea, China, and Japan have navigated these changes differently.
In many ways, Ragnarok Online was emblematic of a certain period in gaming history — one where grinding mechanics and subscription models dominated. Players were willing to invest hours into leveling their characters in highly competitive environments. However, the rapid growth of mobile technology and the rise of free-to-play models, particularly in East Asia, have shifted the dynamics of how games capture and maintain their audiences. Genshin Impact, by contrast, capitalizes on the freemium model, where initial access is free but monetization occurs through microtransactions, specifically in its gacha system. This shift reflects not only a change in game mechanics but also a deeper understanding of consumer psychology, where emotional attachment to characters and constant updates drive revenue.
China’s ascendancy in this space is largely due to its unique ability to blend large-scale commercialization with cultural sensibilities. MiHoYo, the developer of Genshin Impact, navigates China’s tight regulatory framework while successfully appealing to global tastes. Their approach reflects China’s broader strategy in the creative industries: leveraging existing trends, refining them, and scaling them to unprecedented levels. With millions of downloads worldwide and over $3 billion in revenue, Genshin Impact shows how China has mastered the delicate art of exploiting global cultural trends while ensuring compliance with domestic regulations.
Meanwhile, South Korea, which once dominated through games like Ragnarok Online, has been slower to adapt to these changing global preferences. RO belonged to an era of MMORPGs that required high dedication and time commitment, much like World of Warcraft from Blizzard in the West. Both relied on subscription-based models and longer development cycles for expansions. This worked well in the 2000s but has proven less effective in today’s more fluid gaming environment, where mobile access, rapid content updates, and monetization through microtransactions have become the dominant business models. South Korean developers, while still significant players, are now working within the framework of established trends rather than defining them, as they once did.
The differences between these approaches become even clearer when we examine Japan’s position in the gaming industry. While Genshin Impact thrives on its careful balance of global aesthetics, drawing inspiration from anime and various cultural traditions, Japan has often taken a more experimental approach in its creative industries. Developers like Hideo Kojima and studios like Square Enix and Nintendo have historically prioritized innovation and artistry, even at the expense of commercial viability. Games like Death Stranding or The Legend of Zelda: Breath of the Wild push boundaries not only in gameplay mechanics but also in narrative depth and philosophical themes.
This experimental approach, which is deeply rooted in Japan’s cultural identity, stands in contrast to China and Korea’s more business-oriented strategies. Japan’s creative industries often see themselves as pioneers, trying to marry deep cultural roots with universal themes in ways that are both bold and unpredictable. For instance, Ghost of Tsushima, a game developed by the Western studio Sucker Punch but based on Japanese history and culture, exemplifies how Japan’s openness to collaboration can lead to innovative outcomes that merge cultural specificity with global appeal. While Japan’s approach may be slower to generate the kind of rapid commercial success seen in China and Korea, it often results in more lasting cultural impact.
Moreover, Japan’s creative industries, particularly in anime and manga, continue to produce content that is deeply philosophical, experimental, and often highly niche. Titles like Neon Genesis Evangelion and Akira continue to influence global pop culture decades after their release because they tap into universal human experiences while maintaining strong ties to Japanese philosophical and cultural traditions. Japan’s willingness to delve into psychological, existential, and even surrealist narratives creates a body of work that is more introspective and culturally rooted, yet it also makes the country’s cultural exports harder to scale globally in the same way that Korea’s K-pop or China’s gacha-driven mobile games have done.
What we are witnessing in Japan today is a period of deep transformation — creatively rich but commercially uncertain. Japanese creators, whether in games, anime, or manga, seem to be in a constant process of negotiating their deep cultural roots with the realities of global markets. This often leads to artistic breakthroughs but also to commercially risky ventures. It is this very search for authenticity and a balance between East and West that places Japan in a unique, if precarious, position. The country’s creative industries have always been fertile ground for groundbreaking ideas, but finding the right mix of cultural expression and global accessibility remains an ongoing challenge.
By contrast, South Korea and China seem to be in a flourishing phase. Korea, for example, has successfully exported its cultural products — most notably K-pop, but also webtoons and dramas — by adapting them to global tastes while retaining key elements of Korean identity. The success of Korean pop culture has laid the groundwork for the gaming industry to follow a similar path, albeit more focused on refining existing global trends than breaking new creative ground.
China, similarly, is reaping the benefits of its massive domestic market and its newfound ability to appeal to global audiences. However, where China differs from both Japan and Korea is in its highly regulated environment, where even massive global successes like Genshin Impact must comply with domestic controls on content and ideology. The costume censorship imposed on characters like Jean and Rosaria in the Chinese version of the game serves as a subtle but clear reminder that miHoYo, despite its global success, operates within a system where creative freedom is carefully monitored. The CCP’s soft yet persistent control ensures that no matter how far Chinese cultural products expand, they remain tethered to the political and ideological framework of the state.
In this context, Japan’s experimental nature contrasts sharply with the more opportunistic and scalable models found in Korea and China. While Japan searches for cultural authenticity, blending its rich heritage with universal appeal, China and Korea are capitalizing on refined global trends, optimizing for growth, accessibility, and monetization. Both approaches have their strengths, but Japan’s path is inherently more complex, requiring a deeper exploration of identity and global relevance, while Korea and China focus on maximizing commercial opportunities in a rapidly expanding digital world.
The Underlying Theory: Why This Counters Why Nations Fail
In the final analysis, the debate surrounding the success of nations and industries often mirrors the competing approaches to understanding institutional development. Acemoglu and Robinson’s framework, built on the concept of inclusive versus extractive institutions, argues that nations with inclusive institutions — broad political participation, protection of property rights, and equitable access to power — are better poised to foster innovation, economic growth, and long-term success. This framework, though widely influential, tends to rely on relatively simple statistical methods like regression analysis, using variables such as settler mortality as proxies for the historical quality of institutions. The premise is compelling, yet it is also limited in capturing the full complexity of how different states and industries evolve.
In contrast, the global gaming industry, and particularly the comparison between games like Genshin Impact and older titles like Ragnarok Online or even Blizzard’s iconic franchises, provides a real-world reflection of the complexity inherent in institutional development. Just as Acemoglu and Robinson emphasize critical junctures in a nation’s institutional evolution, the gaming industry has seen its own transformative moments. The success of Genshin Impact exemplifies how flexible adaptation to technological shifts and consumer preferences can redefine an entire industry. Much like Genshin’s cross-platform reach and refined monetization model, successful institutions are those that can pivot effectively in response to both internal tensions and external pressures.
What Acemoglu and Robinson’s framework occasionally oversimplifies, particularly through the use of proxies like settler mortality to explain institutional outcomes, is how dynamic and multifaceted systems — whether political, economic, or industrial — actually function over time. The assumption that inclusive institutions naturally lead to superior outcomes overlooks the fact that some systems, even those deemed extractive or authoritarian, can sustain high levels of economic growth and stability under the right conditions. In this sense, their theory often pre-supposes a normative endpoint: that democracy and inclusivity are the optimal paths for all societies. Yet, as seen in both political systems like China’s and industries like gaming, success often emerges through multiple pathways, each tailored to its own context and constraints.
Take the example of Genshin Impact’s rise. Unlike older, subscription-based games such as Ragnarok Online, Genshin capitalized on the free-to-play model, with gacha mechanics perfectly calibrated to capture and retain a global audience. This mirrors how some nations, like China, have structured their governance systems: not with a focus on democratic participation, but on centralized, adaptive control that still delivers impressive economic results. Just as China’s governance model, underpinned by a strong, centralized state, has driven decades of economic growth, Genshin Impact leverages a different, highly optimized monetization structure to generate revenue. In both cases, the outcome — whether GDP growth or corporate profit — defies the expectation that success requires inclusivity or transparency.
The gaming industry’s evolution also reflects how diverse governance models can succeed under different conditions. While Ragnarok Online thrived under the conditions of an earlier gaming era, relying on subscriptions and long-term player engagement, it could not keep pace with the technological shifts and changing player expectations of a newer, mobile-first world. Similarly, older political systems that cling to static models often struggle to adapt in an increasingly globalized world. Genshin Impact, on the other hand, exemplifies a system that has embraced both the potential of mobile gaming and the appeal of anime aesthetics — capitalizing on cultural trends just as nations must harness their historical legacies and modernize their governance to remain competitive on the world stage.
In the context of Acemoglu and Robinson’s theory, one could argue that Genshin Impact has succeeded not by being inclusive in a traditional sense, but by optimizing its internal dynamics to match external opportunities. Much like how certain authoritarian states have managed to achieve economic growth by balancing internal control with external competitiveness, Genshin has fine-tuned its model to appeal to a broad, global audience without the need for the same kind of inclusive development that might be seen in more open, player-driven games. It’s an example of how success in complex systems — whether nations or industries — can come from highly centralized, yet adaptable approaches.
The story of Genshin Impact, when viewed through the lens of institutional theory, offers a counterpoint to Acemoglu and Robinson’s insistence that inclusivity is the key to success. Instead, it demonstrates that success may arise from various governance configurations, each suited to its particular environment. Whether in the governance of states or the design of game monetization systems, flexibility, adaptation, and the ability to manage internal tensions — between control and freedom, innovation and regulation — are what ultimately drive long-term success.
In understanding the complexities of cultural production, governance, and geopolitical realities in East Asia, it becomes clear that avoiding broad overgeneralizations is crucial, while still recognizing the dominant trends that shape each society. The creative landscapes of Japan, South Korea, and China reflect not just cultural preferences, but the intricate web of governance structures, historical trajectories, and external pressures that shape how each nation navigates the balance between freedom, experimentation, and political control. To truly grasp the dynamics at play in these societies, we must look beyond superficial narratives and dig into the deeper forces that guide them.
The Role of Governance in Shaping Cultural Expression
Governance serves as the foundation upon which cultural production rests. In Japan, South Korea, and China, governance models significantly influence the freedom available to creators and the risks they are willing or able to take in their artistic and philosophical pursuits.
- Japan: Freedom in Governance, Risk in Creativity
Japan stands as an outlier in the region due to its relatively high level of creative freedom, nurtured by a Western-style democratic governance system that respects individual rights and allows for open intellectual inquiry. This freedom, combined with Japan’s deep cultural history and philosophical traditions, promotes a culture where creators are encouraged to take risks, experiment with new ideas, and delve into complex, often introspective themes. Works like Hideo Kojima’s Death Stranding or Studio Ghibli’s films reflect the willingness of Japanese creators to push boundaries and challenge societal norms. The emphasis on the shokunin spirit — the dedication to lifelong craftsmanship — further supports this trend. Creators in Japan are often less constrained by immediate commercial pressures, allowing them to explore deeper, more philosophical narratives.
However, while Japan is known for this cultural authenticity and craftsmanship, it’s important to avoid overgeneralization. Not all creators in Japan adhere to these ideals. There are also commercially driven sectors that cater to popular trends, which coexist with more avant-garde and experimental works. This diversity reflects the freedoms granted by Japan’s governance structure, allowing both high-risk artistic experimentation and straightforward commercial production to thrive side by side.
- South Korea: Navigating Freedom with Geopolitical Constraints
South Korea, although similarly democratic, operates within a more constrained geopolitical context. Surrounded by North Korea, China, and Japan, and heavily influenced by its alliance with the United States, South Korea’s governance model provides freedom of expression but often encourages a careful balance between artistic risk and geopolitical pragmatism. South Korea’s creative industries — particularly K-pop, K-dramas, and gaming — are globally recognized, but they tend to focus more on commercial success. The rapid rise of these industries has been built on a strategy of calculated risk, blending global appeal with Korean identity.
However, this does not mean South Korean creators are risk-averse. Filmmakers like Bong Joon-ho (Parasite) and Park Chan-wook (Oldboy) demonstrate that there is room for philosophical depth and social critique within Korea’s cultural output. Yet, the geopolitical pressures facing South Korea, particularly its tense relationship with North Korea, inevitably shape the boundaries within which creators operate. The threat of external pressures, coupled with the need for economic success, often tempers the more radical elements of South Korea’s creative output.
- China: Calibrating Creativity within Political Boundaries
China’s rise as a global power, following decades of internal turmoil and poverty, has been accompanied by strict state control over media and cultural production. The governance structure, dominated by the Chinese Communist Party (CCP), imposes clear limits on freedom of expression, particularly in politically sensitive areas. Yet, within these constraints, China’s creative industries have flourished commercially, as seen with global successes like miHoYo’s Genshin Impact. This game exemplifies the delicate balance Chinese creators must maintain: outwardly promoting creativity and innovation, while subtly navigating the boundaries of state censorship.
China’s governance model requires creators to calibrate their work carefully, balancing between commercial viability and political compliance. While many creators focus on commercially safe projects, there are still pockets of philosophical and artistic experimentation. However, unlike Japan or South Korea, these more introspective works often operate under the radar, as the political environment leaves little room for openly challenging the status quo. The CCP’s tight grip on media ensures that creativity is allowed to flourish, but only within the bounds of state-sanctioned narratives.
Avoiding Overgeneralization and Acknowledging Diversity
One of the critical lessons drawn from this comparative analysis is the need to avoid overgeneralizing cultural trends based on superficial observations. It is easy to label Japan as the nation of risk-taking artistry, South Korea as the commercialized cultural powerhouse, and China as the state-controlled creative industry. However, this simplistic view overlooks the diversity within each society and the nuanced ways in which governance and geopolitical factors shape cultural production.
In Japan, while the overall governance model encourages experimentation, not all creators are driven by the shokunin spirit or philosophical exploration. There is a substantial commercial sector that caters to popular trends, which exists alongside more profound cultural works. In South Korea, the dominance of K-pop and other globally commercialized media should not obscure the fact that there are many creators pushing the boundaries of film, literature, and art. Similarly, in China, while state control is a defining feature of its creative industries, there are still spaces — albeit limited — where philosophical and intellectual exploration can occur.
Thus, while we can identify dominant trends in each country’s cultural output, these trends are shaped by governance models and external pressures rather than being rigid, monolithic cultural norms. Japan’s risk-taking is supported by its democratic freedoms, Korea’s calculated creativity is informed by its geopolitical tensions, and China’s creative calibration is molded by its state-driven governance.
A Positive View of Governance and Multiple Trajectories
One important takeaway is to adopt a positive approach to analyzing governance and its influence on cultural production. Rather than impose a normative judgment — such as assuming that democratic systems are inherently superior for fostering creativity — it is more valuable to recognize that each governance model leads to different cultural outcomes, with their own strengths and limitations.
In Japan, the freedom granted by its governance model has resulted in a culture of deep philosophical exploration and risk-taking in the arts. South Korea’s geopolitical realities temper its freedom but lead to a finely tuned balance between commercial success and cultural expression. China, despite its restrictions, has managed to build a commercially successful creative industry that continues to evolve, even as it navigates the complexities of state control.
Each country follows its own trajectory, shaped by governance, history, and external pressures. Japan’s pathway of creative freedom may seem ideal for fostering innovation, but South Korea’s commercial pragmatism has proven highly successful in its own right, while China’s state-driven model shows that even within constraints, creative industries can thrive.
