It's no longer a secret that China's online gaming industry is booming, and growth is set to continue with companies such as Shanda Games, Netease and The9 leading the way. In 2009, China's online gaming industry earned nearly $4 billion, growing 39.5% from 2008.

Each day, millions of high school students trying to forget the pressures of college entrance exams and young adults discontent with their jobs flock to Internet cafes to play online role-playing games. They're part of China's 384 million netizens, and they sit in front of rows of computers in dimly lighted smoke-filled rooms for upwards of eight hours at a time, living in virtual worlds to escape the pressures of contemporary Chinese life.

Guest author Joel Backaler writes The China Observer, an award-winning blog focused on Chinese technology trends and consumer culture. His writing has appeared in and he has been quoted by the Wall Street Journal China Journal, BusinessWeek, and Seeking Alpha. Joel is a Mandarin-speaking former Fulbright Fellow who has worked and lived in Taipei, Beijing and Singapore with Frontier Strategy Group. Follow Joel on Twitter.

But beyond the Internet cafés, social games have emerged as a convenient alternative for students and workers alike to gain a sense of release and revitalize themselves before tackling the next assignment of the day in their everyday lives. They take breaks to tend to their garden on 5 Minutes' Happy Farm (Kaixin Nongchang) farming game, or steal their friend's car parking space on Kaixin001's Qiang Chewei. RenRenWang (formerly Xiaonei), Kaixin001 and Tencent's QQ Xiaoyou are leading SNS portals, and are the go-to sites to access China's most popular gaming applications.

The widespread popularity of social games is not solely limited to white collar workers in their 20s - social gaming appeals to China's youth, their middle-aged parents, and even elderly retirees looking to share a common hobby with relatives spread throughout the country. The social gaming landscape is developing at an extremely rapid pace, with competition growing increasingly fierce by the day.

What Makes a 'Winning' Social Game in China?

The most popular social games in China are simple to play and appeal to a broad audience. These winning games take place in easily recognizable environments such as kitchens, gardens and parking lots, and only require a few clicks of a mouse to have a shared social gaming experience with your friends.

Happy Farm is the most popular Chinese social game to date. Created by Shanghai-based social game developer 5 Minutes, the game is quite similar to Zynga's FarmVille. Players own a virtual farm where they plant fruits and vegetables. They purchase supplies like seeds, pesticide and fertilizer at a virtual market. While part of the game is about growing and protecting your own harvest, the real fun is sneaking into your friends' farms to steal their vegetables. The game is easy to learn, taps into traditional Chinese farming culture and is extremely addictive - appealing to the young, the old and everyone in between.

Which Social Game Developers in China You Should Know About?

5 Minutes (???), CEO: Shaofei Gao

5 Minutes was founded in 2006 by three college students. In November 2008 it released Happy Farm (below) and achieved immediate success, partnering with leading SNS portals, and receiving a one-time multi-million Chinese RMB payment from Tencent for full rights to the game on its QQZone platform. At the end of 2009, 5 Minutes received $3.5 million in venture capital funding from Draper Fisher Jurvetson.

Rekoo (??), CEO: Yong Liu

Founded in 2008, Rekoo is one of China's leading social gaming developers with several domestic partners: RenRenWang, 51.com, Alibaba, Baidu and Sohu. Rekoo also has strategic overseas partnerships with Facebook, MIXI, Myspace and Cyworld. Rekoo's most successful games are Sunshine Ranch and Animal Paradise.

IsMole (????), CEO: Edwin Chen

Founded in 2008, IsMole started off as a market-leading game developer for social networks, but quickly lost its competitive edge to others like 5 Minutes and Rekoo. IsMole's is best known for its Xingfu Chufang (below) cooking social game that has been released in five different languages across seven countries on thirteen different SNS platforms.

Kingnet Games (????), CEO: Yue Wang

Founded in 2008, Kingnet first released Tower of Babel in April 2009, and within three months had over 500,000 users. In July 2009 Kingnet received venture capital investment from KPCB China. In October 2009, Kingnet had over 2 million users on Facebook.

Challenges Facing Social Game Developers

Social game development in China has entered a period of tremendous growth, but it has yet to fully mature. Companies compete fiercely with varying levels of experience and capital to create the next winning game. Two major challenges have arisen as a result of this environment.

1. Lack of Innovation: There is an overall lack of diversity in gaming context. Copying is rampant amongst competitors - once a social game is proven successful, competitors begin producing their own versions. For example, there are numerous games that take place in farms such as 5 Minutes' Happy Farm: Rekoo's Sunshine Ranch, Kaixin001's Kaixin Huayuan, and Zhiming Xingtong's Happy Farmer.

2. Lack of Continuous Improvement: There is a tendency for developers to stop investing in the game after it is on the SNS platform. In some cases this is due to lack of sufficient capital, while others stop because they're trying to make multiple games to obtain a quick return on investment. This lack of continuous improvement creates short game lifecycles, as user experience ultimately suffers, and a short period of success finally leads to replacement by the next popular game.

To win in this environment over the long-term, it is unavoidable that operational costs will continue to rise, as developers must continuously improve the quality and uniqueness of their games to fend off domestic competition and maintain their market share.

This Is Only The Beginning

Despite these challenges, there is tremendous growth potential in social gaming in China. The first years of growth in China's social game development have served as a foundation. The next few years will see a convergence between social games and 3G mobile gaming. The social game user base that is predominantly comprised of students and young white-collar workers will continue to grow with even more older players joining the crowd.

While Chinese companies will continue to face a competitive market at home, the best companies will develop unique winning strategies domestically and localize them to win success overseas. In a recent interview, 5 Minute's CEO Shaofei Gao was quoted as saying: "China's netizens are becoming more mature, they are gradually becoming more accustomed to paying for gaming, and social gaming market opportunities will definitely continue to increase in the future."