The device described in the application appears to use GSM, as opposed to the TD-SCDMA standard that is more common in China, and notably lacks Wi-Fi capabilities. Apparently, Apple was hell-bent on preserving this feature so as to maintain a certain type of user experience across the globe, but the Chinese government has been just as adamant in having the Wi-Fi functionality disabled.
Getting into a new and huge market like China could be a big boost for the company’s bottom line, so relenting to the country’s strict regulations is obviously a concession Apple feels is worth making. They still need to strike a deal with a Chinese carrier and no recent signs of progress have come from its talks with China Unicom. However, the handset could finish tests and receive its network access license within three to six months, possibly helping speed up talks with the carrier for an early 2010 launch.