I've heard this but can't really search for verification. Supposedly this law forces all Chinese videogames to be set in fantasy settings. Nothing in the real world.
If this law exists I argue it should be removed. It's holding their industry back from making any culturally relevant content because nothing can be set in our world, about real lives, people or places. You'll never get a Death Stranding or Metal Gear out of China while it exists. They should untether their industry so it can produce more of cultural relevance.
Can anyone verify?
The one I mentioned in my edit, Chinese Expeditionary Force, seems to fit the bill. The Invisible Guardian is another videos game set in WWII. My Time at Portia is a post-apocalyptic game but supposedly includes quite a bit from contemporary China. Nine Trials is another that supposed has fantasy elements but has quite a bit that comes from modern day China. I don’t know much about any of these but I was able to find them pretty quickly. I also can’t find anything on a specific law that covers modern settings/events, though I’d imagine they would be more restrictive on certain sensitive topics. Developers themselves probably self-censor quite a bit, but this isn’t unique to China. For example, it would be rare to see video games about directly about slavery/racism, red scare paranoia, etc. in the US.
This comment has some good points: https://hexbear.net/comment/5280349