“Unlocked” iPhones are continuing to flood into China as consumers wait for Apple to sign a distribution deal. 

An estimated half a million First Generation iPhones were brought to China between June 2007 and March 2008, roughly one-tenth of all global shipments of the iPhone. 

In addition, some estimates state that 40 percent of the entire world’s supply of “unlocked” iPhones are in China. 

Apple is said to be in talks to begin legal distribution of the iPhone in China. 

From the AFP (via Google News):

Apple chief Steve Jobs said in June he expected to reach a deal in China this year and that the obstacles Apple had to overcome had to do with “regulatory bodies”.

Chinese media reported on Tuesday that China Mobile, the country’s largest handset operator, was in the final stages of talks with Apple to launch the iPhone in China. But neither company would confirm it.

In the meantime, Chinese consumers are not waiting for Jobs. The country is widely considered the world’s biggest market for smuggled, “unlocked” and counterfeited iPhones.