Revenue from online games in China will hit $1.2 billion, next year, an expected increase of 25%, said market analyst iResearch.

Online games are tremendously popular among Chinese Internet users, with some titles, such as Netease.com's Fantasy Westward Journey, attracting more than 1 million concurrent players during peak times. The popularity of online games has been a financial boon for game operators and distributors, but revenue growth is expected to slow during the years ahead, iResearch said.

In 2008, revenue from the games market will grow an expected 18%, with growth slowing further to 10% in 2010, iResearch said.

Market analyst IDC has a more aggressive growth forecast. In May, the company predicted revenue from China's online game subscriptions will hit $673 million this year, and increase at a compound annual rate of 36%, reaching $2.1 billion in 2010.

The rapid growth of China's online game market parallels the expansion of broadband Internet access in the country.

During the first six months of this year, the number of broadband Internet users grew by 45%, the China Internet Network Information Center said last week. That brings the total number of broadband Internet users in China to 77 million, or roughly two-thirds of the country's Internet population, it said.

IDC put the number of Chinese Internet users who play games at 26.3 million last year, predicting that number will increase to 33.6 million by year-end.

The IDG News Service is a Network World affiliate.