(Photo credit: Xiaomi / CNET)

China is the world’s biggest mobile phone market, with a billion users, and with 35% of Chinese accessing the Internet exclusively through mobile devices. But while Apple is making inroads into the Chinese market with their latest iPhone and new iPad, there’s another strong contender in the smartphone scene: Xiaomi. The company, dubbed China’s iPhone, has just launched version two of its hotly anticipated smartphone release.

Xiaomi launched the Mi-One at about this time last year, initially with a limited release. Demand quickly outpaced supply, and Xiaomi had to make subsequent releases in batches, but that still did not satisfy the Chinese smartphone users’ craving for a quality device sold at a reasonable price. With their second release, Xiaomi is upping the ante, with specs found to be superior to the Samsung Galaxy S III — at least based on benchmarks — and with a tiered model setup, so that users have a choice.

Xiaomi Mi2

The Xiaomi Mi2 — yes, I’ve always thought it would be named the “me too” — comes with the following specs:

1.7 GHz Quad-core Qualcomm Snapdragon processor

Adreno 320 GPU

2GB of RAM

16GB internal storage

4.3-inch capacitive touchscreen at 1280×720 pixel resolution

8 megapixel rear camera (with upgraded F/2.0 lens)

2 megapixel front camera

HDMI-compatible USB port

HSPA+ connectivity up to 42 Mbps

The Xiaomi Mi-Two will run the company’s MIUI v4 skin of Jelly Bean. The Mi2’s USB port will let users connect the phone to a compatible television set, for an improved multimedia experience. The best thing about the Mi2 is the price. Xiaomi will sell the phone for 1,999 RMB or about $314.

Xiaomi 1S

The company also announced a mid-range model, which will launch on August 23. The Xiaomi 1S will be powered by a dual-core Snapdragon processor running at 1.7 GHz. Xiaomi plans to offer this as an in-between model to the MiOne and Mi2. The 1S will sell for 1,499 RMB ($235). The company had also reduced the price of the MiOne to 1,299 RMB ($204).

Xiaomi had recently wrapped up a $216 million Series-B funding, reports The Next Web, resulting in a $4 billion market valuation. While not as large as Apple, the company is often compared to its Cupertino, CA counterpart due to the way it marries hardware and software and due to its corporate culture. The company hopes the capital infusion will help it improve production in order to meet the foreseen demand.

Is the Xiaomi Mi2 worth the $314? Xiaomi claims that the Mi2 reportedly beat out the Samsung Galaxy S3 in benchmark tests. And given tight integration between hardware and software, the Mi2 might give the Galaxy S3 a run for its money, considering the price.

Xiaomi is mainly targeting the Chinese market, but who knows if the smartphone will be popular internationally, as well?