As the 90s generation begins to graduate from college and enter society, the decline in China's school-age population is casting a shadow on the country's online games industry.

At the 2010 China Game Industry Annual Conference, industry giants Tencent, Netease and Shanda Interactive Entertainment Ltd. (SNDA) were unanimous that 2010 had been a dismal year. Although a report by the iResearch Consulting Group showed China's online game revenue a year-on-year growth of 21 percent, rising to 32.74 billion yuan, the growth rate has slowed for three consecutive years. And the report concluded that further slowdown is "a sure thing."

Problems facing the industry include a decline in the number of quality titles and competition from online video, micro-blogging and social networking sites. But the decline of the school-age population is the core issue.

The number of university students, who are the industry's main market, has expanded rapidly over the past decade, reaching 21.45 million in 2009. But the rate of growth has declined from 36.1 percent in 2000 to 6.12 percent in 2009.

If online game companies stick with their current business model they are almost certain to reach an impasse in the not too distant future. .

Adding to their woes are stricter regulations, such as demands for real-name authentication of users, and stiffer competition from overseas players like Apple, Microsoft and Nintendo. With their market share under threat from all sides, it remains to be seen if China's big-time gaming companies are up to the challenge.