Pearl Research found that the online games market in China grew more than 60 per cent in 2007 to reach a value of USD 1.66 billion.
The company - in a 130-page "Games Market in China" study - is forecasting that the online games market in China will exceed USD 3 billion in 2010.
"The year 2007 exceeded expectations with the market growing more than 60 per cent, driven by compelling and diverse content, free-to-play games, and rising demand for leisure and technology products," said Allison Luong, Pearl Research's managing director.
"Chinese-themed and advanced casual games are expected to drive revenues in 2008 and beyond."
Luong noted that average revenue per user has been rising in China and thinks there is still room to grow as operators enhance monetisation efforts from free-to-play games.
According to Pearl's research, China's most popular online game - Netease's "Fantasy Westward Journey" - has 1.66 million peak concurrent users, followed by Giant's "Zhengtu Online" with 1.52 million peak concurrent users.
Giant Interactive generated the majority of its USD 209 million in revenues from that single title.
Game operators in China experienced strong revenue growth in 2007, with Shanda up 49 per cent to USD 338 million, Giant up 274 per cent to USD 209 million, The9 up 30 per cent to USD 175 million and Perfect World up 593 per cent to USD 95 million.
Coinciding with this revenue growth was a wave of IPOs by game operators Giant, Perfect World, NetDragon and KingSoft.