Earlier, many Chinese online game operators heavily depended on foreign game developers who were in a dominant position in the industrial chain. For instance, Shanda Entertainment, established in 1999, is one of China's first online game operators. It once focused on providing services for South Korean online games such as Legend of Mir, Fortress 2 and Shattered Galaxy. The service charge and revenue brought about by selling virtual gear made Shanda's owner Chen Tianqiao a legend worth 6 billion yuan and ranked the second richest IT mogul according to the 2006 China IT Rich List released by Rupert Hoogeverf.

"Owing to the lack of indigenous Chinese games, many game products coming from different cultures and value systems had an adverse impact on Chinese youngsters. This forced Chinese game operators to develop their own games," said Wang Hui, Deputy General Manager of JoyChina, an online gaming company.

Therefore, Chinese companies took up the challenge to develop online games and to market them to the game players. At present, domestic Chinese games take up about 64 percent of the total online gaming market in China.

In the meantime, Chinese online games are also exported to foreign countries.

"Chinese online games are popular among foreign players," said Ren Jian, CEO of Kingsoft Corp. "The rich culture and history provide enormous resources for online game development."

It is estimated that China had sales revenue of over $20 million in the overseas market in 2006, mostly to neighboring countries like Viet Nam and Japan.

However, as the 25-year-old online game player Zhang said, "Domestic online games are too simple and don't challenge much."

Foreign online gaming companies are superior in capital supply and have powerful research and development. When China further loosens its restriction on those companies, domestic online gaming companies will suffer.

Currently, according to the 2006 Gaming Industry Report, foreign online games account for about a 40 percent market share in China.

"Among us players, we tend to believe if it is produced by the U.S. Blizzard, it must be good," said Zhang.

One thing is noticeable. The popularity of online gaming does not always mean a profit, especially for domestically made games.

The 2006 Gaming Industry Report shows that only 10-15 percent of domestic game producers and operators are profitable now while most of the companies can only make ends meet or are even on the brink of bankruptcy.

Delving into the future market

The 2006 Gaming Industry Report estimates the sales revenue of the online gaming publication industry will reach 24.43 billion yuan with an annual growth of 30.2 percent.

With the prevalence of the Internet, the online gaming industry will expand beyond the large and medium-sized cities. Shi Yuzhu, President of Zhengtu Game, pointed out that according to their investigation statistics, online gaming in three big Chinese cities including Beijing, Shanghai and Guangzhou only takes up 3 percent of the whole online gaming industry. Shi suggested counties and rural areas would become the major arenas for large online gaming operators.

Kou of GAPP pointed out three kinds of games or gaming services which would probably become more profitable in 2007.

The first is a combination of advertisement and online games. Currently, online games usually make a profit by selling gear and weapons or other derivative publications. But the operational mode has been broken up. In 2006, Volkswagen marketed its new Polo car through entering cooperation with a popular online game called Race Fever developed by Shanda Entertainment. In the same year, Coca-Cola advertised its products by joining hands with a hot online game called Backyard Basketball.

Kou said the second growth point for the industry is sport games as the Beijing 2008 Olympics approaches. The most popular games in 2006 were related to sports in one way or another, like Backyard Basketball and Crazy Racing. Kou pointed out that online sports games vividly mimic all kinds of real sports and become popular among players. One of the other major reasons is that sports games are viewed favorably by the Chinese Government. Kou stated that in 2007, the Chinese Government would loosen restriction on such games and encourage their development.

The cell phone gaming market is also significant. The 2006 Gaming Industry Report shows cell phone gaming has a market of 1.48 billion yuan, up 50.2 percent compared with the previous year. Kou said with the advent of the 3G era, cell phone online gaming would take off to even higher levels.