The promotion offer underscores how competitive China's PC and Internet markets have become, and the extent to which the market has become saturated after years of breakneck growth.

For a monthly payment of 198 renminbi and a 27-month contract, China Telecom customers in Taizhou, Jiangsu province, get an HP Compaq DX2308 desktop PC with a 3.2GHz Intel Corp. Celeron D processor, 512M bytes of RAM, an 80G-byte hard drive and a 17-inch CRT monitor, according to an online advertisement (in Chinese).

The bundle includes 150 hours of broadband Internet access per month, most likely a 512K bps (bits per second) DSL (digital subscriber line) connection, the most common in China. For an additional 700 renminbi, customers can upgrade to a 17-inch LCD (liquid crystal display) monitor.

A similar deal is available in other Jiangsu cities, including Nantong.

This isn't the first time China Telecom and HP have offered a PC bundled with broadband for 198 renminbi. Similar deals were offered in Jiangsu province earlier this year.

Bundles like this are not yet common in China, although several vendors have experimented with them and seen mixed results, said Bryan Ma, director of personal system research at IDC Asia-Pacific.

Besides the low-cost desktop, China Telecom and HP are offering a couple of other options to Taizhou customers, including an HP Compaq NX6515 notebook with a dual-core 1.6GHz Turion 64 X2 processor, 512M bytes of RAM, an 80G-byte hard disk, and a 14-inch screen. The notebook deal involves a one-time payment of 6,998 renminbi, or US$923, and includes 1,660 hours of broadband Internet access during school vacation periods.

HP may be the world's biggest PC maker, but the company still lags behind Lenovo Group Ltd. in China. During 2006, the company was the fourth-largest PC maker in China, with a market share of 8.2 percent.

HP's market share increased to 12.5 percent during the first quarter of 2007, thanks to aggressive notebook sales, Ma said.