Chinese Internet company Sina Corp and its US counterpart Yahoo Inc have joined hands to enter the online auction market in China with the establishment of a joint venture.

The two companies said yesterday that they had reached a definitive agreement on the establishment of the joint venture in anticipation of the good prospects for the e-commerce market in China.

"Just like the fast growth of online advertising and wireless messaging services in the past two years, we believe that this year and next, it will be e-commerce's turn,'' said Hurst Lin, chief operating officer of Sina Corp, the biggest Chinese Internet portal in terms of revenue.

Allan Kwan, managing director of Yahoo's North Asia business, also said in a joint interview with Hurst Lin with China Daily yesterday that the 78 million Internet users in China and their enthusiasm for e-commerce were good reasons Yahoo wanted to start the auction business with Sina.

Both Lin and Kwan declined to reveal the financial details of the joint venture, but said it will be based in Beijing with capital and technology from Yahoo and capital and Internet traffic from Sina.

The proposed joint venture will bear a separate company name and start operations in the middle of this year, but its website will have the logos of its parent firms, they said.

It will provide both a fixed-price and bid-price model for the sale of consumer goods from small and medium-sized businesses and individuals and offer a range of services to facilitate transactions, the companies said.

"Small and medium-sized businesses are an important part of an economy, but Chinese businesses have been troubled with difficulties in selling across the nation due the large land mass of the country and their small scale, so our new venture will be a big help in that regard,'' said Kwan.

He explained that Sina's popularity among Chinese Internet users is the biggest attraction for Yahoo.

Sina's peak daily pageviews reached 300 million. It also has more than 38 million registered users and 10 million frequent subscribers.

Sina Corp, which does not have experience and engineers in online auction, believes co-operation with Yahoo will solve these problems.

Hurst Lin said that the partnership is an exclusive agreement, so its co-operation with the Shanghai-based online auction website EachNet will also terminate when the joint venture is formally launched.

EachNet, controlled by US online auction giant eBay Inc, is a major partner of Sina's online shopping mall and the huge traffic of Internet portals like Sina has been an important channel for EachNet to spread its reputation among netizens.

"We have not received any information from Sina to stop our co-operation,'' said Wesley Bai, an EachNet spokesman. "Even if Sina wants to do so, it must obey our contract.''

However, he declined to reveal the details of the contract.

He believed that the market potential of e-commerce in China is huge, so more competition will be good for the industry.

Bai added EachNet's position in China's online auction market is already well-established, so the entry of Yahoo and Sina should not panic EachNet.

A Shanghai-based senior Internet industry analyst, who declined to be named, believes the partnership of Yahoo and Sina faces many challenges.

He said that since Yahoo and Sina are also competitors in the portal and mobile messaging businesses in China, how they will co-operate and how they will handle some conflicts of interests still remains to be seen.

However, Allan Kwan with Yahoo said that considering the almost overwhelming dominance of Chinese companies like Sina, Sohu.com and Netease.com in the portal business, Yahoo will not compete with them face-to-face in that area and will concentrate on some services, in which Yahoo is very strong like search engines.

The Shanghai analyst also pointed out that both Yahoo and Sina do not have a lot of experience in operating the auction business, especially in China, where people prefer to do business face-to-face.

He estimated the online auction business in China was worth about 200 million yuan (US$24 million) last year.

Sina's stocks on the NASDAQ stock market in New York rose by 4.19 per cent to US$42.97 on Wednesday, while Yahoo's shed 1.89 per cent to US$48.80 and eBay gained 2.32 per cent to US$65.59.

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