China’s 3G telecom provider, China Unicom, will be offering customers a free iPhone 4s when they sign up for a three-year contract. The deal will start from January 13.

With iPhone crazed Chinese squeezing through buildings and clamoring to get their hands on one, this will make things even crazier. What Chinese person doesn’t like FREE right?

Since China is Apple’s 2nd largest market in the world now, Apple is trying to capitalize on the enormous growth opportunity that China represents. Locking people into a three year contract and blocking them from switching to the increasingly popular Android phones is a good strategy.

According to Bloomberg, contracts in China are offered at $45 (286 yuan) per month for a 32-gigabyte iPhone 4S on a three year contract and $60 (386 yuan) per month for 16-gigabytes on a two year contract. In China, the iPhone costs roughly $800 (6,000 yuan).

The 3 year contract is greater than the standard 2 year contract because China Unicom needs to make up for the loss they incurred when they launched iPhone 4 in the first 2 years. “Subsidizing the iPhone at as little as 286 yuan a month ‘would hit their near-term subsidy expense,’ said Alen Lin,” reports Bloomberg.

Jason is an Australian born Chinese living in Beijing, specializing in entrepreneurship, start-ups and the investment eco-system in China, especially in the tech and social area.

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