China Mobile is expected to start selling an Apple (NSDQ: AAPL) iPhone, stripped of 3G and Wi-Fi in order to comply with Chinese regulations, according to The South China Morning Post, citing a report from the Daiwa Institute of Research (via Cellular-News). Of course, being able to sell the device in the most populated country in the world could seriously boost sales, even if more than China Mobile is detecting at least 400,000 jail-broken iPhones on its network today.

SEE ALSO: Still No iPhone 3G On China Mobile

One reason it may not want 3G as part of the phone is because the carrier is widely expected to build out its eventual 3G network using the Chinese developed TD-SCDMA format, and by disabling the 3G functionality the iPhone would less appealing to users who might buy the handset and unlock it to be used on the expected W-CDMA network from China Telecom.

In-Stat said there’s other reasons the iPhone will do well in China. The smartphone market in China is driven by people using their phones for entertainment purposes, such as music players, cameras and video and to access the mobile Internet, like IM, e-book, and games. The research firm also estimates that 20 percent of handsets sold in China last year cost more than 4,000 RMB (US $533), which would put the potential iPhone market at 28 million users.