According to the 2004 China Online Game Industry Report, prepared by market research firm IDC, sales of online games hit 2.47 billion yuan last year, up 47.9 percent from the previous year.

Foreign online games companies accounted for 70 percent of those sales, but it won't always be that way, Sze Yan-ngan, founder of the China Game Publishers Association (Hong Kong), said Thursday.

He said the online games business would be just like the ``the Hong Kong film market in the early 1980s, which was dominated by Western movies'' but where Chinese-language films now rule.

Online games in China were once the preserve of foreigners, but a domestic industry began to emerge at the same time as online entertainment companies like Shanda, Netease and The9.

China last month ordered the General Administration of Press and Publication (GAPP) to take the responsibility for regulating the online games industry. Before that, the task was split among several government agencies.

``The industry reform was aimed at closing loopholes in the supervisory net. This is partly to blame for today's influx of foreign games,'' said Sze, who participated in recent GAPP meetings on the Internet publishing industry.

Apart from controlling imports of online games, GAPP will also implement policies to help domestic online games producers win a bigger market share by developing games on Chinese themes, he said. They would be encouraged to develop 100 Chinese online games on nationalistic themes in the coming five years.

``These 100 games must be based on Chinese history and heroes ... we hope we can encourage Chinese online games designers to introduce more healthy Chinese themes for youngsters,'' he said.

Some online games based on Chinese history and classical literature have already found a market. Last year, Netease.com's Westward Journey and Fantasy Westward Journey, based on one of the four classic Chinese novels, Journey to the West, had sales of about 400 million yuan.

Now, only 10 foreign-made games per year are allowed into the mainland market. Last year, 30 or 40 were imported.

Under the second phase of the Closer Economic Partnership Arrangement (CEPA II) with the mainland, Hong Kong online companies may invest in online games portals and Internet cafes in China. Before, they could develop games for the Chinese market but had to rely on mainland companies to market and distribute them.

Hong Kong companies are allowed to own up to 49 percent of joint ventures operating online games.