LOS ANGELES--With $297 million in revenue for 2004 and continued growth projected in the coming years, China's online gaming industry is thriving despite, or perhaps because of, stringent government regulation.

On Tuesday afternoon, Xiao Wei Kou, deputy director of the General Administration of Press and Publication of the People's Republic of China (GAPP), spoke during an E3 conference session on the Chinese government's role in shaping the country's online gaming industry, from government censorship to controlling piracy and fostering Chinese game development.

Unfortunately, Kou spent most of his tightly scripted presentation bringing the audience up to speed on the way the gaming industry in China works and shed little new light on the changing face of games in China.

In particular, Kou seemed to avoid the topic of how China intends to control the rampant piracy within its borders. According to an Entertainment Software Association report earlier this year, China ranks behind only Malaysia as a top producer of pirated games.

"The rapid growth of online gaming in China introduced new ways to pirate including pirate servers and cheating and infringed other people's IP and are totally illegal," Kou said through a translator. "The Chinese government is totally against those activities."

When pressed in a post-presentation conversation as to the specifics of how the government plans to combat these activities, he elaborated briefly.

"There are two important steps," Kou said. "The first one is to cooperate with other government agencies to establish relevant laws and regulatory rules. And the second one is to cooperate with the police bureau to crack down on those activities on a case-by-case scenario. Earlier this year, we already did one case in cooperation with the police bureau."

One changing aspect of the Chinese online gaming market that Kou did discuss in some depth was its unprecedented growth. Online gaming in China grew almost 50 percent from 2003 to 2004, but Kou stressed that such rapid expansion was not going to be indefinitely sustainable.

"You have to understand with the market growth, competition will be intensified, and one day the high-speed growth will slow down," Kou said. "The domestic gaming market in China is actually already facing new bottlenecks. ... This bottleneck is really how the Chinese domestic gaming companies can develop their own games and core competency and not only lead the Chinese gaming market but also go to other countries and compete internationally."

Kou then went into some detail on what the Chinese government is doing to address this problem. First off, the GAPP has a program to provide financial support and a streamlined approval process through government censors for 100 nationalistic Chinese online games. This project began in 2004 and aims to publish 100 "domestically devout" games in five years.

"Twenty-one games have already been introduced and got very positive feedback," Kou said of the project's progress.

Another key factor for Kou is creating a domestic pool of development talent. "According to our estimates, there will be more than 300 domestically developed online games in the next five years. And we're in need for more than 20,000 professional game developers. Right now the reality is there are only a few thousand professional developers in China. The lack, especially senior-level developers, has become another important bottleneck."

To address this issue, the GAPP is promoting the "1 + 10 Human Resource Development Project." The "1" refers to building an academy dedicated to the education of high-level game developers, while the "10" refers to choosing 10 universities with good development and educational resources.

Kou also hopes to establish "development bases" in Beijing, Shanghai, Guangdong, and Sichuan.

"Using these four bases will leverage the economic advantages enjoyed by these regions and also promote the game development industry towards neighboring regions," Kou said.

Kou also touched upon the importance of the annual ChinaJoy gaming expo in encouraging domestic development, and he announced a Chinese Domestic Online Gaming Developer's Conference "to facilitate the cooperation of Chinese domestic gaming developers with companies from other nations."