China's dot-com economy grew nearly 63 percent year on year in the second quarter, despite increasing inflation and the effects of the Sichuan earthquake, a Shanghai-based research firm reported on Monday.

Revenue generated by China's online search, game and travel providers reached 13.32 billion yuan (US$1.94 billion) in the April-to-June period, iResearch said.

Because of the runup in prices and the natural disaster, the quarterly growth rate was only 14.9 percent.

In addition to the revenue earned by Internet services firms, overall trade volume generated by buyers and sellers also rose during the quarter, hitting 29.1 billion yuan, up 22.6 percent from the first quarter.

Online game revenue, which was influenced by the earthquake, gained 9.2 percent quarter on quarter to 5.08 billion yuan, compared with 13.4 percent growth in the first quarter.

China halted all entertainment services nationwide, including online games, for three days in May to mourn the earthquake victims.

"New-media leaders are outpacing the old-media players as the online media break down the barriers (geography, distribution and content) to make them accessible to anyone, anywhere, anytime," Richard Ji, a Morgan Stanley's analyst, said in a report.

China's Internet population recently took the No. 1 spot from the United States for the first time.

On June 30, China had 253 million Internet users, compared with about 220 million in the US, according to the China Internet Network Information Center.

There's even higher potential ahead. Only 19.1 percent of all Chinese are Internet users, compared with 60 to 70 percent in the US, Japan and South Korea.

And the Beijing Olympics, which opens this weekend, provides even more good news. The Games are expected to fuel a surge in online advertising and cyber games, according to the report by iResearch.

The Internet economy will be powered by online advertising for the Beijing event and the advent of third-generation telecommunications services in the world's No. 1 mobile phone market, iResearch said.

The coming high-speed mobile network will allow handset users to enjoy new and faster data services, such as video conferences and film downloads.

Among the cyber-market segment, Baidu still leads in the search sector, with Alibaba.com dominating online auction services, followed by foreign players Google and eBay. Competition in online games is heating up as many newcomers have entered the fray. Only about 27 percent of China's online game revenue was contributed by major Internet portals such as Sohu and Sina, according to iResearch findings.

(Shanghai Daily August 5, 2008)