China's online population, the world's largest, has risen to 420 million, but the country's internet system was beset with insecurity as 60 per cent of Internet users experienced hacker and virus attacks while 30 per cent complained of passwords being stolen.

China's online population touched 420 million, almost a third of the population, by the end of June, boosted by rising cell phone connections, according to a report by China Internet Network Information Centre (CNNIC). The number was up 36 million from December last year.

The proportion of Internet users to the total population in China had risen to 31.8 percent by the end of June, compared with 28.9 percent at the end of 2009.

With growth came problems as more and more Chinese faced security concerns and developed lack of trust in on-line partners.

Almost 60 percent of Internet users experienced hacker attacks and Trojan viruses during the first six months this year, and more than 30 percent had passwords stolen, state-run Xinhua news agency quoted the report as saying.

Internet users who connect through cell phones was the major force driving the rise in the country's on-line population, the report said.

By the end of June, Internet users on cell phones hit 277 million and accounted for 65.9 percent of the total Internet users. The number of people connecting by cell phone rose by 43.34 million since the end of 2009, it said.

About 49.14 million Chinese went on-line solely through their cell phones, indicating huge potential for the mobile Internet industry, the report said.

Internet-based business was also growing rapidly, the report said.

About 140 million people, or about 10 percent of China's population, have been shopping online. About 128 million people used online payment systems and 122 million used online banking services, it said.

The report also found that 25 million more people were watching on-line video programmes in the first half, bringing the total to 265 million, ending a year-long decline in online video audiences in 2009.

However, the growing popularity of the Internet could pose challenges to the government, which has often resorted to tight control to prevent unrest in the country.