According to the AFP, the 21st Century Business Herald, a Chinese state-controlled financial newspaper, reported that talks between Apple and China Mobile, the world's largest cell-phone carrier, are in the "final stages."

"Steve Jobs and I hope the iPhone will enter China as soon as possible," China Mobile CEO Wang Jianzhou told reporters at the ITU Telecom Asia 2008 exhibition in Bangkok on Tuesday. "We are discussing this issue, but we do not have an agreement."

Overcoming Hurdles

China Mobile reportedly has a nondisclosure agreement with Apple that prevents Wang from commenting further. Noteworthy is the fact that China Mobile is a member of Google's Open Handset Alliance, a group of companies that plan to develop products based on Google's Android mobile-phone platform that would compete directly with the iPhone.

If Apple inks a deal with China Mobile, the iPhone 3G would be sold in 43 countries. China has more than 600 million cell-phone subscribers, with China Mobile accounting for 415 million of them, according to the company's figures.

"China represents a huge and potentially lucrative market for Apple to get into. We know that iPods, for example, are very popular in the Chinese market," said Michael Gartenberg, vice president of mobile strategy for Jupitermedia.

"One would imagine that a deal that would open up the Chinese market to Apple for the iPhone is potentially huge in terms of the number of sheer devices Apple can put into that marketplace and the number of devices the marketplace can absorb," he added.

The major obstacle -- a revenue-sharing agreement Apple initially insisted on -- has been removed. Apple backed off those demands in June. Apple CEO Steve Jobs has said he would like to launch the iPhone in China this year.

Competing with the Knockoffs

"We know there's been demand for the iPhone in China. People are bringing in grey-market devices. We are seeing knockoffs of it. That's just part of the marketplace in China and something that every company realizes," Gartenberg said. "It's better to be selling the original and have that available as well, recognizing that, yes, you may have to compete against some of these knockoff devices."

According to Gartenberg's research, Apple's iPod has performed well in China despite the knockoffs, which bodes well for the iPhone's possibilities. The iPod's success demonstrates that people will pay a premium for the original product.

"Certainly there are very few devices on the market that have the cache of the iPhone and that have that appeal of the iPhone that Apple is still managing to capture," Gartenberg said. "People are still waiting in line for the iPhone."