Chinese technology shares faced a downturn following a recommendation from the country's cyberspace regulator to limit smartphone usage for children under the age of 18.

On Wednesday, companies like Alibaba and video-sharing platform Bilibili witnessed a decline in their share prices, which continued into early trading on Thursday.

The proposed law aims to restrict children to a maximum of two hours of smartphone usage per day.

This initiative comes four years after the implementation of gaming restrictions for children in the world's second-largest economy.

The Cyberspace Administration of China (CAC) is behind the proposed rules, which will also include a ban on children accessing the internet on mobile devices from 22:00 to 06:00 local time.

According to the CAC's proposal, industry players, including mobile phone manufacturers, apps, and app stores, will be required to develop a "minor mode" function to set usage limits, varying by age.

For instance, children between 16 and 18 years of age will be allowed two hours of screen time daily, while those under the age of eight will only be permitted eight minutes.

The proposal is currently open for public feedback.

Enforcement of these rules is likely to fall on technology giants, similar to how gaming restrictions were managed in the past, according to Ray Wang, founder and CEO of Silicon Valley-based consultancy, Constellation Research.

Though there might be workarounds, such as children gaining access to their parents' devices, Wang suggests that gaming restrictions were generally well implemented.

The impact of these developments is evident in the stock market, with Alibaba's shares closing more than 3% lower in Hong Kong on Wednesday, and Bilibili's share price tumbling nearly 7% in the territory.

As of mid-day on Thursday, Alibaba's shares were trading around 2% lower, and Bilibili was down by 0.5%.

On the other hand, technology giant Tencent's shares, which closed approximately 3% lower, experienced a slight recovery, being 0.1% higher in Hong Kong.

China has previously taken measures to address video game addiction, which officials believe negatively impacts children's health.

In November 2019, a curfew was imposed on online gaming for minors, prohibiting gamers under 18 from playing between 22:00 and 08:00. Additionally, they were restricted to 90 minutes of gaming on weekdays and three hours on weekends and holidays.

More recently, children were banned from gaming for more than three hours per week.

These regulatory moves have had an impact on Chinese technology companies, with increased regulations allowing the US to surpass China as the world's largest gaming market by revenue, according to research firm Newzoo.