Although smuggled iPhones are available offline, it is online, on platforms like Taobao Marketplace where about 150 million people shop, that is drawing the most interest.

According to Reuters calculations based on the Taobao Index, the consumer research data website of Alibaba Group, the iPhone 5 over the past six days had an average turnover value of 713 compared with the iPhone 4S that had an average turnover value of 314. A higher turnover value indicates more transactions done on Taobao for an item.

This indicates strong demand for the yet-to-be-officially released iPhone 5 on the mainland, where Apple is losing market share to smartphones running Google Inc's Android system.

But while demand is strong, constraints on smuggled supplies are limiting sales online and a rough calculation shows sales of only about 4,000 units via Taobao.

Apple's latest iteration of its popular phone officially went on sale last Friday in the United States, Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the UK. It took little more than five hours for the first iPhone 5 to go on sale in China after being smuggled across the border from Hong Kong.

"We smuggle our iPhone 5s from Hong Kong to the mainland. You don't need to worry about fake ones," said one online seller on Taobao Marketplace, whose shop has sold more than 700 units.

Demand for smuggled iPhones is strong in China because the release in the mainland usually happens months after the product's release elsewhere. Local media reported on Wednesday that the iPhone 5 has received approval from China's product quality certification centre, but the phone still needs telecom network approval from the government before it can be officially launched.

In August industry data showed that Apple's share of China's smartphone market almost halved to 10 percent in April-June as buyers waited for the iPhone 5 or switched brands.

But penny-wise customers are not jumping on the bandwagon just yet as the iPhones are sold at a hefty premium compared to official prices.

"I think the new iPhone 5 will be released at the end of this year, but I will wait for a while because I believe the price will go down," said Yu Xiaochen, 21, a graduate student in Shanghai.

(Additional reporting by the Shanghai Newsroom; Editing by Matt Driskill)

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