China's overall video game market jumped 68% in 2006, with the segment of online games generating $995 million in revenue, up 74% from the 2005 level according to the fifth annual report from Nicko Partners.

PC games are driving the surge - they can be audited as Niko did by researching the 20-million PCs used in Chinas' 225,000 Internet faces. However, consoles which for some reason are banned in China are apparently doing well on grey import.

According to the report, "“Chinese online game operators introduced free-to-play massively multiplayer games that are, in fact, not at all free, because gamers spend money on virtual items and services in the game. These free-to-play games helped the market size rise beyond expectations in 2006. In addition, the country added 3.4 million total gamers in 2006 and now boasts 37.5 million gamers, 90% of whom play online games. By 2011 this number is expected to swell to 71.9 million.

"Chinese gamers pour into the cafés every day to play online and LAN games with friends. They spend money in the games on virtual gifts for friends, services for their characters, and virtual items to help with levelling."