A decade ago, China lacked even a single online game provider. Today, as Web-related businesses in China rake in profits and new technology lures an ever-increasing number of Chinese to the Internet, the online gaming industry is large and growing fast. All over the country, tech-savvy teens, twenty-somethings and thirty-somethings sit at PCs in private homes, Internet cafes and university computer labs for hours on end playing complex 3-D games.

China was home to about 120 million online gamers as of the end of 2007, with revenues reaching $1.29 billion, a 57% increase over the previous year. China's game-industry revenues are expected to hit $1.79 billion in 2008 and rise to $2.3 billion in 2009, according to the China Internet Network Information Center.

One outfit benefiting from the surge in online gaming in China is Perfect World Co., Ltd. (Nasdaq:PWRD). Founded in 2004 and publicly listed as an American Depositary Receipt last year, the Beijing-based online game developer and operator has a portfolio of 3-D massively multiplayer online role playing games (MMORPGs), including Perfect World, an adventure game played in a historical Chinese setting; Perfect World II, its more advanced sequel; Legend of Martial Arts, named after a popular Chinese TV series following the exploits of a swordsmen in ancient China; Zhu Xian, a kung-fu focused fantasy game; Chi Bi, a war game set in China's turbulent Three Kingdoms period; and Hot Dance Party, a game that allows players to practice dance moves and create and customize characters (family members and pets).

The company distributes physical and virtual prepaid game cards and sells "points" online through its e-sales system and website. While most of Perfect World's revenues are generated domestically, the company also licenses its games outside of China. It recently inked deals to license its games to partners who will expand its . . .

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