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When we move from disc-based games to digital distribution the overhead of selling a game will go down, piracy may/will become more difficult, and developers can make as much money selling games for less money ... Combine this with the rise of the Chineese middle-class and gaming in China will become a very big industry.

At the same time, Chineese development is already becomming a major player as companies outsource development to China ... Sometimes it is only part of a game (Gears of War) and other times it is to create entire games on a tiny budget (lots of shovelware).