IDG News Service reports that Apple has a version of the iPhone with China's WAPI security method on the road to release: Owen Fletcher at IDG News Service writes that China's spectrum regulator lists an iPhone with GSM-flavored 3G (used by Unicom) and Wi-Fi with WAPI alongside other encryption method.
The WAPI method is a proprietary measure for authentication used in China, with most of the spec secret, and controlled by a consortium of firms with strong ties to Chinese government. In order to use WAPI in the past, an outside firm would have to partner with one of this consortium, which could lead to the leak of intellectual property, as has happened in the past. China has cracked down on some aspects of IP theft and unauthorized manufacturing, but it's still a rampant problem.
While the inside details of WAPI are unknown, I have long stated that it must contain backdoors to allow easy monitoring by government officials, because that's simply how things work in China.