The report by the state-run China Internet Network Information Center said the number of Chinese using the Web rose 12 percent in December to 513 million people.
The report also cited China's increasing use of "weibo" microblogging sites similar to Twitter, finding nearly half of Chinese Web users logged into the sites in 2011, up from 63 million in 2010, eweek.com reported Monday.
People logging in on mobile devices and those accessing the Web in rural areas also increased, the Chinese report said.
Nearly 40 percent of China's population of 1.3 billion are Internet users, the report said.
U.S. firms are taking note of the numbers,
Microsoft is teaming up with the leading Chinese language Internet search provider, Baidu, to provide users of Baidu with results from Microsoft's search engine Bing, eweek.com reported.