There are a number of articles bouncing around the tubes that are talking about the potential release of the iPhone in China. Of course, Apple will need to drop the price to be a bit less exorbitant in a country where the average monthly wages are 1/3 the cost of the iPhone in the U.S. (not to mention the monthly service charges).
Part of the potential problem with an iPhone release in China is that fact that the SIM card is locked. A senior telecom executive in China says "You have to realize Chinese SIM cards are not locked up, as the iPhones' are." The executive also mentions the different corporate climate in China; it's a rule not to share revenue with terminal producers.
Besides the price and the technical issues, other analysts think the iPhone is still a niche produce for a niche audience, unlike in the U.S. Much of the content coming into the iPhone, including the popular iTunes service, is still yet to be implemented in the Chinese market.
iPhone image by wengistein [cc, 2.0]