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Abstract Background The epidemiology and disease burden of annual influenza in children in mainland People's Republic of China have not been reported in detail. To understand the incidence and epidemiology of laboratory-proven influenza hospitalization in children in China, a review of available laboratory and hospital admission data was undertaken. Methods We conducted a retrospective population-based study in Suzhou and the surrounding area of Jiangsu province, China for hospitalized cases of respiratory illness at Suzhou Children's Hospital. Cases of pneumonia or respiratory illness were identified from hospital computer data bases. Routine virological testing by fluorescent monoclonal antibody assay of all hospitalized children identified influenza and other viruses. We calculated incidence rates using census population denominators. Results Of 7,789 specimens obtained during 2007 and 2008, 85 were positive for influenza A and 25 for influenza B. There were 282 specimens with parainfluenza virus and 1392 with RSV. Influenza occurred throughout the year, with peaks in the winter, and in August/September. Overall estimated annual incidence of laboratory-proven influenza hospitalization was 23-27/100,000 children 0-4 years old, and 60/100,000 in infants 0-6 months, with an average hospitalization of 9 days. Conclusions Influenza disease in young children in this part of China is a relatively common cause of hospitalization, and occurs throughout the year. The use of influenza vaccine in Chinese children has the potential to reduce the effect of influenza in the children, as well as in their communities. Studies are needed to further assess the burden of influenza, and to develop and refine effective strategies of immunization of young children in China.