Government officials and China's online game providers said on Wednesday that the industry will not sustain rapid growth if it fails to innovate and rid itself of repetitive online games, repeating the challenge the 30-billion-yuan ($4.55 billion) industry faces.

China's online game market, which expanded rapidly over the past 10 years, has entered a "steady" development curve and "needs to solve problems that used to be less noticeable during the fast market expansion", said Sun Shoushan, deputy director of the industry regulator, General Administration of Press and Publication (GAPP).

His remarks were made after GAPP released figures Wednesday showing the industry's annual sales reached 32.37 billion yuan last year, an increase of 26.3 percent from 2009.

Sun added that the industry's revenues will easily exceed 50 billion yuan in five years' time, based on a "conservative" annual growth rate of about 10 percent.

"The industry maintained good momentum last year, even with a worldwide economic slowdown," said Sun, "but the lack of innovation has become a problem that may hinder its development."

Online game providers, who saw signs the market was slowing in the second and third quarters last year, agreed.

"Of the hundreds of online games produced every year, most are repeats and copies of each other," said Liu Wei, president of a major online-game company, Giant Interactive Group Inc.

She added that in addition to innovative content, online game providers also have to think about new business models.

She said the company will try a method of generating revenue that differs from the time- and prop-based business models in its online game "ZT Online 2", which will be launched in a half year.

Other companies, however, are putting more of their efforts into Web games and games on social networking sites. Such games have increasingly gained users in past year or two, compared with massively multiplayer online role-playing games, whose growth has slowed after years of quick development.

"We may even separate our Web game department as a new company for further growth in this area," said Wang Feng, chief executive officer of LineKong Entertainment Technology Co Ltd, an online-game company.

The country's largest online game provider Tencent Holdings Limited, earlier said it will also invest more in the niche game markets this year, such as real-time strategy games, sports games, and games on Web pages.

Tencent held 28.5 percent of the country's online game market last quarter, followed by Shanda Interactive Entertainment Ltd with 18.1 percent, and NetEase.com Inc with 16.3 percent, according to the domestic research firm Analysys International.