"The mobile market here is quite phenomenal," the Microsoft chairman told an audience of Chinese university students. "That's an area where the United States is not a leader, so it's particularly important for us to look around the world."
Gates' visit to China comes amid official efforts to dilute the dominance of Microsoft's Windows operating system by developing a Chinese alternative based on the open-source Linux system.
Gates said Tuesday while visiting Malaysia that Microsoft might offer lower-cost versions of Windows for developing Asian countries, though he wouldn't say whether China was included.
Redmond, Washington-based Microsoft says its Beijing development laboratory is one of its most successful research centers. China has the world's biggest mobile-phone market, with some 250 million users.
Gates said the company would be spending even more of its $6.8 billion annual research budget in China, though he didn't give details.
"China has a lot that it can do in using software to modernize its economy and to make a contribution globally to advancing the quality of software," Gates told hundreds of students who filled a cavernous hall at Beijing's Olympic Center.
At a news conference, Gates said he wasn't concerned about China's plans to enact antitrust laws that could target Microsoft.
"I don't expect problems," Gates said. "We already do business in over 50 countries that have laws like that, and we're in full compliance with those laws."
European regulators say Microsoft unfairly hurt rivals by building its multimedia software into Windows--a finding that the company is appealing.
Gates has been greeted in China with the pomp normally given to heads of state.
He met Wednesday with Premier Wen Jiabao at the Zhongnanhai compound where Chinese leaders live and work in central Beijing.
The Microsoft chairman also met with education ministry officials to offer advice on how to improve their curriculums. In his meeting with Wen, he outlined Microsoft's agreements with the powerful State Development and Reform Commission.
On Thursday, Gates visited a Beijing school to showcase Microsoft's $10 million program launched last year to give computers to schools in poor, rural areas in China.
"I was thinking that the computer was something amazing when I was about 13. And I didn't understand why the adults were so afraid of the computer, and I didn't understand why the adults didn't see that the computer was going to change things," Gates said. "So I felt like I had a secret."