The trade body representing the global record industry has launched piracy lawsuits against China's biggest internet companies.
Less than 1% of Chinese music sales are said to be legal
Firms targeted in the legal action include Baidu, China's largest internet business, and Yahoo China, in which US giant Yahoo has a 44% stake.
The International Federation of the Phonographic Industry says the firms offer direct links to pirated music.
It estimates that 99% of all music files in China are pirated.
As a result, the trade body says the annual legal music market in China accounts for just $76m (£38m).
An IFPI spokesman said the industry had hoped that the arrival of digital music would bring a new start for the music industry in China, which was a hotbed of CD piracy, but those hopes had been dashed.
It accuses China's internet companies of linking to pirated music sites to boost their advertising revenues.
The IFPI has written to the directors of Yahoo in the US to urge them to use their influence to stop the practice.
The World Trade Organization is currently continuing with a formal investigation into a US complaint about Chinese piracy.