By Alfred Hermida
Technology editor, BBC News website
UK game makers have been urged to turn their attention to China where huge amounts of time and money are being spent on gaming.
Inside this internet cafe are 400 computer stations
Representatives from the games industry taking part in a conference in London this week heard that more than 20 million Chinese were playing games and the number was rising fast.
China is set for a big explosion in spending on entertainment, largely fuelled by online sales of video games, a report this week predicted.
Last year, Chinese players spent almost US$500m on online games.
The amount of money being spent on games has led to a sea change in the attitude of officials, who used to see games as similar to gambling and laziness.
"The government is encouraging and supporting the development of online games," said Sunray Zhaohui Liu, President of the Beijing-based New Synergy Consulting firm.
The authorities are hoping to attract more foreign investment in games by hosting a two-day games conference in September in Beijing.
China is the world's most populous country, with a population of 1.3 billion. Of these, 500 million live in the cities, where they have cheap and easy access to online games via internet cafes.
"In the big net cafes in Beijing you can have several hundred PCs," explained Mr Zhaohui Liu. "Most people there are under 30 and this is how they get access to broadband to play online games."
An estimated 22.8 million people play online games according to figures from 2004, spending almost US$500m on their favourite past time.
Zhongguancun Science Park: Heart of China's computer industry
"The online gaming market is flying high in Asia," said Mr Zhaohui Liu.
His comments have been echoed by a report by PricewaterhouseCoopers looking at the next five years for entertainment.
It said the Asia-Pacific region could be expected to enjoy the fastest growth in spending on leisure, such as video games, casino gaming, TV distribution and music.
The report said the massive growth in China meant it would overtake Japan as the region's biggest market by 2008.
The only cloud on the horizon in Asia-Pacific is the persistent threat of piracy.
This is one of the reasons why console gaming has yet to take off in China.
Console makers such as Microsoft, Sony and Nintendo rely on game sales for much of their money.
But widespread counterfeiting means pirated games are easily available for a fraction of the price of the retail copy.
World of Warcraft has proved a big hit with Chinese gamers
It is another reason why online gaming has proved such a money-spinner as gamers pay to play.
Mr Zhaohui Liu highlighted the success of the Massively Multiplayer Online Role Playing Game, World of Warcraft.
The game was launched in China at the beginning of June, with gamers paying five cents an hour to play.
The title was phenomenally successful, with the most number of Chinese playing at once reaching 450,000.
"With the fast growth of the Chinese market, the number of World of Warcraft paid subscribers worldwide broke through two million this month," said Mr Zhaohui Liu.
As well as offering opportunities for Western game makers, China also presented challenges due to the tight regulation of games.
"Games are a very serious business in China," said Mr Zhaohui Liu, explaining that three government ministries covered video games.
More than 20 million people play online games in China
Last year a Swedish game called Hearts of Iron was banned for portraying Manchuria, Tibet and Xinjiang as independent nations, while a Norwegian shoot-em-up also angered the authorities.
"We have different political systems," explained Mr Zhaohui Liu diplomatically. "That means we judge things from different angles so maybe in some areas we have different opinions."
At the same time, concerns are growing about the amount of time youngsters spend playing games, as well as the sort of violent games they are playing.
"We don't have a rating system in China, so there are some problems growing with the fast growing online market," said the Chinese analyst.