China's online gaming industry made significant progress last year, and the government will continue to support its development with advantageous policies, said officials and industrial executives.

"It was a year of change in the competition scenario of the online gaming market in 2004," Kou Xiaowei, deputy director-general of the Audio, Visual, Electronic and Internet Publishing Department under the General Administration of Press and Publication (GAPP), told the first China Game Industry Annual Conference in Guangzhou.

He said domestic games accounted for more than half of the nation's online gaming market in the past year, a significant shift from the heavy reliance on imported games in the preceding three years.

According to a report from the China Game Producers' Association, sales of online games reached 2.47 billion yuan (US$298 million) in 2004, a year-on-year rise of 48 per cent. The number of online gamers also grew to 26.33 million.

Due to the boost from online games, Chinese telecom operators also raked in 15.07 billion yuan (US$1.82 billion) in Internet connection fees and IT firms received 6.37 billion yuan (US$769 million).

The association predicts sales of online games will grow at an average annual rate of 34.7 per cent, reaching 10.96 billion yuan (US$1.32 billion) in 2009.

China has attached great importance over the past few years to the development of the domestic online gaming industry, including establishing an industrial fund, offering tax incentives, and supporting their research and development capability.

Niu Shuguo, chief of the IT Industry Administration division of the Shanghai Informatization Commission, said companies making high-quality online games will enjoy the same preferential treatment in terms of taxes and in leasing land as those offered to leading software companies in Shanghai.

He noted that Shanghai is also working hard to help the over 30 online game companies build up their brands.

Shanghai is the most important online gaming base, the home of China's biggest online game operator Shanda Interactive Entertainment and NASDAQ-listed The9.

With encouragement from the government and the fast growth of the industry, 73 gaming companies have developed or are developing 109 game titles and 21 games are already in operation. Their combined market share has already grown by 50 per cent.

GAPP's Kou said the Chinese Government will continue to support the development of domestic gaming companies.

The country will establish several Internet technology innovation centres based on large game operators' capabilities.

GAPP will organize a domestic developers' conference in the first half of the year and a domestic game contest in the second half of 2005 to help game developers and operators share their experiences and improve co-operation.

Kou predicted that in the next five years, at least 300 game titles will be developed by domestic firms.

However, the lack of skills will remain a major problem in the industry.

The GAPP official estimated that the industry will need at least 20,000 game developers in the next five years, but there are just under 5,000 at present, meaning the development of local design capability will be severely curtailed.

As a solution to this, China plans to establish a professional game college to train senior talent for the industry.

At the same time, the Chinese Government will select 10 universities in the country to open gaming majors.

Shanghai also held two game development contests to discover talent in the industry and recommended them to work for industry leaders like Shanda and The9.

China will also encourage domestic game companies to go overseas to develop their businesses on a broader platform through exports or acquisitions.

Besides improving local development capacity, GAPP will release a regulation on the publication of online games with the Ministry of Information Industry and revise the administrative regulation on electronic publications, to stop pirate servers of online games as well as online gambling and create a healthy environment for the industry.

(China Daily January 21, 2005)