China Mobile wishes to maintain control and sell applications through the App Store itself – which is something that we all know Apple is never going to allow…no matter how big the market is.
If Apple decides to completely break-off negotiations with China Mobile, there are always other options. China Unicorn and China Telecom are both smaller companies that would most likely welcome the iPhone with much more flexible options…mainly so they can gain an advantage over China Mobile.
Will the iPhone ever make it to China officially? Probably…but not anytime soon.