The 46 Chinese universities approved by the government to run internet courses have enrolled about 400,000 students in the past year.
The ministry of education said that by the end of the five-year plan period (2001-05) as many as 100 universities would be involved, with about 5 million internet students.
While profitability is some way off, many business analysts believe that online universities and colleges are potentially one of the most promising internet businesses in China.
"The future will be very good and the enthusiasm from both universities and students will be greater and greater," said Pan Jianxin, general manager of Prcedu.com, partner of Renmin University of China (RUC) one of the country's top universities.
Prcedu.com has invested more than 50 million yuan (£4 million) in to Ruc's internet operation, which is China's largest with 120 software programmes and more than 6,000 online students last year. It expects to enrol 10,000 more by the end of 2001. The dean of Tsinghua University's Continuation College, Yan Jichang, which enrolled 2,500 students last year, was also optimistic.
"More than 200 million Chinese people do not have the chance to go to university, so the internet has given us a good way to extend higher education to those people," he said.
However, not all parents and educationists believe online education is as good as an on-campus education. While the number of courses available is slowly increasing - English, law, economics, art and design have been added - offerings to date are limited to courses from universities that have obtained ministry approval.
Mr Jichang said it was essential to safeguard reputations for academic quality.
Hardware limitations also restrict growth. Bandwidth is not great enough on common phonelines to use interactive teaching software in real time, meaning that RUC online students receive some lessons from CD-Roms, while those at Beijing University go to classrooms to fill in the gaps.