Popular new games, including Dungeons and Dragons Online, helped China's largest specialist online games firm, Shanda Entertainment, increase profits 22 per cent to $40.1m in the last quarter of 2007, the company reported.

Despite the severe winter weather and widespread power cuts that hit China in the first three months of 2008, Shanda still expects profits to rise at least six per cent compared to the previous quarter. Quarterly revenues are expected to hit a new record of $100m.

Shanda is China's largest online games firm with almost 20 per cent of the market, according to Beijing-based research firm Analysys International.

The number of paying players of massively multiplayer online role playing games (MMORPGs) increased 12.7 per cent to 3.47 million during the fourth quarter, according to Shanda president Jun Tang.

Shanda earned $82.6m in revenues from MMORPGs during the quarter, a quarter-on-quarter increase of 9.3 per cent.

All players stand to reap the rewards of an expanding market, according to Shanda chief financial officer Grace Wu who acknowledged strong performance from Shanda's competitors during the fourth quarter.

"We believe there is robust potential out there for every industry player to find its own position and excel," she said.

In an attempt to link Shanda's business model to the popular web 2.0 social model, executives stressed the strong communities built up within online games.

"Content attracts users and community retains users," said Chen Tianqiao, Shanda's chief executive.

"The only difference between the online games community and other virtual communities is that the online community lives primarily within a fictional game environment."

Half of Shanda's eight upcoming MMORPG games will be licensed and half are being developed in house, said Jun Tang.