China has the biggest mobile market today, with about 1 billion users. Since smartphones currently constitute a small minority of this industry, there is much room for growth. But with Google mostly absent from China, who will fill in the supposed void? Local e-commerce company Alibaba wants to eventually dominate the market with its own Aliyun OS.

In an interview with the Wall Street Journal, Alibaba chief strategy officer Zeng Ming says the company expects its Linux-based Aliyun OS to rise in popularity in the country, with the number of smartphone makers using Aliyun rising from two manufacturers to five by year-end. Alibaba wants to be “as strong as Android in China.”

Apart from Haier Electronics and Beijing Tianyu, three other smartphone-makers are set to join in. “We have quite a few [new handset partners] lined up,” Zeng says, although the executive declined to name which brands.

Zeng stressed that smartphone makers want to have a choice. Given Apple’s patent litigation win against Samsung this August, manufacturers are concerned about the future of Android. Zeng said a manufacturer should have more than one supplier, and in this case, Alibaba wants to look beyond Android and Windows Phone.

The main challenge Android is facing in the country is the lack of support for Google services. Google search, maps and Gmail are unavailable from the mainland. Considering these are core services that Android uses — especially Gmail — carriers and manufacturers have had to provide their alternatives.

Take for instance Xiaomi, which sells Android smartphones that run MIUI. Xiaomi can afford to sell its devices cheap (at $314 for a flagship smartphone that can put the Samsung Galaxy S3 to shame), as it earns from premium apps and services. Aliyun, meanwhile, has a different content model from Android and iOS. Instead of apps, Aliyun runs web-based apps. It also runs its own mail and mapping service.

Should Google be worried? There is certainly room for growth in China and it’s only logical for local companies to try to meet local demand. The Chinese will also become the world’s biggest consumers soon. By end 2012, China will account for 26.5% of global smartphone shipments, ahead of 17.8% for the U.S., says IDC. Online retail sales are also booming, and China is set to overtake the U.S. by 2015.

Should Google kowtow to the Chinese government’s content restrictions and censorship if only to be able to fully integrate Android into this market?