CCID predicted China will maintain an average compound growth rate of 40 percent in the navigation and location-based services industry over the next five years.

The industry output value is expected to reach 150 billion yuan in 2015 and 400 billion yuan in 2020, CCID said.

In September 2012, China's Ministry of Science and Technology announced a plan for the navigation and location-based services industry during the 12th Five-Year period (2011-2015).

It seeks the setting up of five industrial bases across the country, nurturing 30 innovative enterprises and helping to form an industry with a scale higher than 100 billion yuan.

In addition to Chinese telecom operators, many Internet companies have started to compete for a portion of the location-based services market. Jiepang, a Chinese language equivalent to the US-based social networking pioneer Foursquare, has attracted more than 3 million users since its establishment in 2010.

Baidu Inc, the nation's biggest search engine by market share, officially set up a location-based services business unit in October last year. Shen Li, head of Baidu's location-based services business unit, said the department experienced a rapid expansion, with staff numbers growing to more than 200 in a short period.

"The launch of the location-based services business unit was in response to our customers' calls for certain services," Shen said, in an interview with Global Entrepreneur, a Chinese magazine. Baidu Map is China's most popular mobile map application with a market share of 21 percent, according to Beijing-based research company Analysys International.

Previously, Baidu Map only provided services such as searching locations. Now customers have specific demands such as asking for detailed information on the location of the best hotpot restaurant in Beijing, Shen said.

However, most location-based services projects in China are losing money, according to industry insiders. Baidu admitted its location-based services business unit had not earned any profits yet and the company could not figure out when it will make money out of the technology.

"China's location-based services industry is still in its infancy. Most projects in this phase are small and scattered so it is very difficult for companies to generate profits and support further expansion," said Wang Dongju, chief technology officer of China Mobile's location-based services center.

In addition, China needs to integrate its geographic information resources, Li Hui at China Mobile said.

"Geographic information and data are the foundations of the location-based services industry but, currently, there is disorderly competition among various Chinese information and data providers," Li said. "I suggest the country integrates resources and constructs a national geographic information system platform. Then it can offer the best electronic mapping services to the market."