According to International Data Corp (IDC), the mainland online gaming market was worth US$96.5 million in 2002 and is expected to grow 31 per cent annually, reaching $357 million in subscription revenue by 2007.

China has about 13.12 million online gamers - 41.9 per cent of them paying customers - who spend countless hours glued to their computers playing what are known as massive multiplayer online role-playing games.

'The [online gaming market] is pretty hot now,' IDC analyst Chin Jun said. 'The telcos need content for their broadband offerings.'

The new venture would introduce NHN's Hangame interactive entertainment platform to China, with offerings including e-business, community and video-on-demand services. Its online gaming platform in South Korea carries more than 50 internet games and 10 mobile games.

Market watchers said the joint venture would bring online games to the mainland as early as April.

'It is a very big market now - growing aggressively,' Mr Chin said. But foreign console makers such as Microsoft and Sony have found difficulty cracking a market where software piracy is rampant.

Investment in mainland online gaming comes as Shanda Networking, said to be the mainland's most popular network, prepares for a Nasdaq listing expected in the first quarter.

According to reports, Japan's Softbank plans to launch its BB Games online portal in China, while South Korea's Webzen derives about 12 per cent of its net income from a joint venture in the mainland.

A PCCW spokesman declined to confirm the establishment of the joint venture but said: 'We are working with NHN right now and details will be disclosed later.'

NHN previously said it was seeking to expand into China and Japan.

Its net profit rose 172 per cent year on year to 29.53 billion won (HK$183 million) for the six months to June last year. Sales were up 158 per cent to 76.48 trillion won.