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That is a HUUUUUGE market and I am surprised PALM has not made a assertive push for market share before now. As the article states, "The Chinese market is dominated by local companies selling PDAs that use proprietary operating systems."
That was certainly my experience whilst there. However these systems are totally self contained and do not "talk" to PC's.
There are Chinese OS overlays available, I found one programmed by a chap just up the road in fact, er, that's 1 hours drive in China. I believe he is doing a roaring trade with Chinese all over the world who want their Palm's to be quad-lingual.
It will be interesting to see how well PALM do this and how much inroads to the market they actually make.
I have not read the ZDNet article, but I think the proprietary handheld/OS is probably talking about the Chinese<->English translators, which lots of people (even primary school students) have one in their pocket. Some of them are credit-card size, and many do nothing but act as a dictionary. They don't talk to PCs, but I think they represent a completely different market than PDAs.
It is a big market, with more than 1billion people in mainland and millions of other Chinese world wide... However, the locals are there already.