It was earlier rumored that any iPhone releases in China would lack Wi-Fi; that's turned out to be true: I wrote back on 15 July 2009, in addressing what was a rumor at the time, why Apple couldn't release a Wi-Fi-enabled iPhone in China, because Apple would have to include WAPI, a proprietary government-backed non-disclosed Wi-Fi security spec. To use WAPI, non-Chinese firms have to partner with one of several in-country companies that are controlled by the military or government or both.
The AP notes, "Unicom's iPhones lack WiFi because it was temporarily banned by Beijing, which was promoting a rival Chinese system, according to BDA. The ban was relaxed in May after manufacturing had begun." That's incorrect. Wi-Fi wasn't banned, rather devices that used Wi-Fi with the internationally supported IEEE security standards that China doesn't like.
I have long maintained that China developed WAPI for two reasons: first, to provide an obvious back channel into encrypted communications that would allow the government to monitor as it desired; second, to provide access to foreign intellectual property by requiring companies to work with a local partner.