I've been using android phones in China for a little while now. My advice is not to buy a TD-SCDMA phone, because it will be tailor made for China mobile and:
- crippled. Usually it will have google services replaced with Baidu ones, and the android market replaced with a China Mobile one. In fact, most of the China Mobile androids are actually running something called O-Phone, which is a different version of android that China Mobile built, and is incompatible with other android systems.
- basically useless outside of the country or on other carriers. Might be able to get an edge signal on another carrier, but I don't know anyone who has tried.
For the google certification that Pierre mentioned, that is just the certification that the phone must pass for google to allow it to use specific google apps such as talk, maps and the android market. Carriers can ignore that if they want to install their own tailored crapware.
Wifi is available in Chinese smartphones now. They lifted the restriction last year.
Anyway, your best bet is still grey market. I would recommend the HTC Desire (best built-in Chinese functionality), which should be running around 3000 kuai these days, or the original Motorola Droid (aka milestone), which should be in the mid 2000s and features a hardware keyboard. These are slightly older phones, but they're holding up pretty well and have a lot of community support. The very best phones available in China these days should be running at about 4000 kuai, give or take.
Some of the cell phone dealers at Baihui should have these, and maybe some dealers at computer street as well. You can also check out Taobao, but I'd recommend searching for Kunming only, so you can go and check it out in person before buying.
With an international phone, you'll only get EDGE on China Mobile, but that's fast enough for basic map and chat functioning. And you're phone will get 3G when you go home.
One more thing. You will be able to access the app market with these phones, but not the paid apps. If you want to access paid apps, you'll have to root the phone and install Market Enabler, which tricks the market into thinking you're in the states or the UK.
About half of the grey market phones in China have already been rooted and China-optimized by Chinese hackers, so you may not have to do anything to it.