China’s online gaming market revenues jumped 65.9% year on year to reach 4.43 billion yuan (US$637 million) during the second quarter of 2008, up 11.2% from the previous quarter, according to China-based consulting company Analysys International.

Nasdaq-listed Shanda Interactive is ranked #1 among Chinese online game operators with 18% market share and its MMORPG revenues grew 65% for 2007. The  Shanghai-based company invested in 15 companies last year and recently announced it will raise the salaries of key staff by over 40%, showing how competitive China’s lucrative online gaming industry is becoming.

Online Gaming Market Share In China, Second Quarter 2008

Source: Analysys International, August 2008

The flagship game ‘Fantasy Westward Journey’ from Netease remains one of the most popular MMORPGs in China as peak concurrent users (PCU) hit 2.08 million on Apr 27 and registered 170 mil users. Giant Interactive generates most of its revenue from one game, ‘ZT Online‘, that reported over 2.1 mil PCU in April representing a new PCU record in China’s online game industry. Giant has a cash flow of US$800 million and its purported acquisition target – The9 recently reported that net revenues increased by 4% QoQ and 69% YoY to CNY455.1 million.

Earlier this month iResearch Consulting had reported that China’s online game market reached 5.08 billion yuan (US$741 million) in 2Q 2008, jumping 66.6% YoY. Shanda ranked first (15.7%) by operating revenue, followed by NetEase (11.2%), Giant Interactive (9.8%) and Tencent (9.4%).

Frost & Sullivan expects online gaming to be the key driver for paid Internet content revenues in the Asia Pacific and China was singled out as the largest and fastest growing market. China’s online gaming market grew more than 60% to rake in an impressive US$1.66 billion for the year 2007 and is expected to exceed US$3.4 billion by 2010, according to Pearl Research.