The World Bank and Peking University Public Policy Institute have jointly released a report which says information and communication technologies are vital for China to sustain its rapid economic growth and for it to become an innovation-driven society.

However, the report also says high Internet fees, insufficient regulation, dependence on foreign technology and a lack of talent are the four main factors that block China's information industry development. The report, entitled "China's Information Revolution: Managing the Economic and Social Transformation", says that the price of Internet use in China accounts for 10% of the total income level, which is almost 10 times that of the developed countries, and the high price is leading to an increasing digital gap between urban residents and rural groups in the country.

The report says China needs to further reform the laws and regulations in areas such as telecommunications, access to government information, data protection and privacy. It also needs to invest more to provide rural residents access to telecom infrastructure.

The data released by China Internet Network Information Center shows that more than 20% of urban residents in China have access to the Internet, compared with only 3% in the countryside. China is now drafting its first telecom law and will soon set up its first universal service fund, which subsidizes telecom operators for providing services in rural areas.

China has the world's largest telecom market and second-largest Internet user population. By the end of 2006, it had more than 144 million Internet users and 480 million mobile phone subscribers.