In November, Sony's PlayStation 3 received a quality certification from a Chinese safety standards body, prompting speculation that Beijing would lift the ban, which the government said was imposed in 2000 to safeguard children's mental and physical development.
"We are reviewing the policy and have conducted some surveys and held discussions with other ministries on the possibility of opening up the game console market," the China Daily quoted an unnamed source from the Ministry of Culture as saying.
"However, since the ban was issued by seven ministries more than a decade ago, we will need approval from all parties to lift it."
An official at the ministry's cultural market department, which is responsible for the legislation, denied the report.
"The ministry is not considering lifting the ban," the official, who identified himself only as Bai, told Reuters.
In Tokyo, Sony shares traded 8 percent higher while Nintendo gained over 3.5 percent, outperforming a broadly weaker Nikkei index.
Yoshiko Uchiyama, a spokeswoman for Sony Computer Entertainment, a unit of Sony, said she could not comment directly on the report.
"Our stance towards business in China has not changed. Of course, we acknowledge China as a promising market for our business, and we are always considering and preparing business opportunities and possibilities (in the country)," she said.
A Nintendo spokesman declined to comment.
Earlier moves suggest Chinese authorities are ready to take a softer line on game consoles.
Last year, Lenovo Group Ltd launched the Eedoo CT510, a motion sensing device similar in concept to Microsoft Corp's Kinect extension for its Xbox game console. Lenovo marketed the Eedoo as an "exercise and entertainment machine".
Video game consoles are banned in China, but online gaming and playing games on mobile devices are both extremely common, which analysts say limits the potential upside for Sony and rival game machine makers.
© Thomson Reuters 2012
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