China news/analysis in brief

• CYOP Systems (ticker: CYOS), a provider of online video games and tournaments, announced it had reached a marketing agreement with a US subsidiary of Sina.com (ticker: SINA). Under the agreement, SINA US will offer CYOP
  exclusive promotion for CYOP's free tournament games of online poker
  and online billiards type games targeting global online Chinese users.

• Chinese software and online gaming firm Kingsoft reportedly plans to
  raise $100-$300 million in a Nasdaq IPO in Q3 2005. According to research firm IDC, Kingsoft's JX Online game was the sixth-most popular game in China last year. Kingsoft plans to sell 10% of its shares, which would value it at between $1-$3 billion.
  Investors include Chinese PC maker Lenovo Group, which holds more than 20% of the firm. Lenovo's CFO, Mary Ma, is chairman of Kingsoft.

• Shanda Interactive (ticker: SNDA), an operator and developer of online games in China, announced a strategic partnership with Universal Music. Pursuant to a memorandum of understanding, Shanda will offer Universal Music's online music to its users through streaming, and download. The partnership allows Shanda to extend its entertainment content offerings into the music arena for the first time. The alliance gives Shanda users access to Chinese-language songs by Universal Music's artists via an interactive song-streaming channel operated by Shanda. It also will mark Universal Music's first online music offering in the China market.

• CCW Research published a number of predictions for the rates of growth of certain technology sectors through 2009. Internet revenue will grow to $9.3 billion - 86% of which will come from advertising, mobile value-added services, and games. Internet development will be driven by 3G, e-commerce and network entertainment. The telecom sector will grow at an annual rate of 10.7%. The consumer electronics sector will grow at an annual rate of 10.9%. The number of 3G users will reach 180 million by 2009.

• A joint survey by IDC and the China Games Publishers' Association (CGPA) revealed that the local online gaming market grew 47.9% in 2004 to $297.9 million. The growth is expected to continue over the next five years at a compound annual growth rate of 34.7%. 

Other key points from the IDC-CGPA survey:

• Most Chinese gamers continue to play older online games instead of trying out newer
  titles.
• 2 out of the 10 most popular online games of last year
  were released in 2004.
• Online gaming firms tend to rely on
  one-hit products for most of their profits.
• Game developers are eager
  to identify new sources of revenue.
• The number of older and higher-income online gamers in China increased in 2004 - though youths still make up the bulk of the local gaming population.
• Although China's online gaming market started with imported titles, locally-developed games are starting to gain traction.
• 4 out of the 10 most-popular online games last year were created by local developers.
• 20% of China's online gamers trade in so-called virtual commodities (such as weapons and potions that can be used by their online avatars), spending an average of $84.40 a year.

• Rupert Murdoch, CEO of News Corporation (ticker: NWS), who in recent years has sought to expand a satellite business in China, had this to say when asked about the business climate there: "There are indications that it's closing up more than opening up," he said, calling the enterprise "very hard work." More here.

• China's Ministry of Commerce announced that actual foreign direct
  investment in China in Q1 2005 rose 9.5% year on year to $13.4 billion.
  Contracted foreign direct investment rose 4.5% year on year to $35.22
  billion. The number of newly approved foreign-invested companies fell
  9.15% year on year to 9,305. By the end of 2004, there were around
  280,000 foreign-invested companies in China. Actual foreign direct
  investment totaled $213.29 billion as of the end of last year.