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EBay Plans New Chinese Website With Partner

SAN FRANCISCO - EBay is expected to announce plans Tuesday to open a new Chinese Web site as part of a joint-venture with a Beijing-based Internet company, signaling a strategic shift in the online auction company's Chinese operations.

The new site--operated by online portal and wireless operator Tom Online--will focus on the domestic Chinese market, according to a person familiar with the deal who requested anonymity because it hadn't been formally announced.

EBay's current Chinese portal, http://www.ebay.com.cn, will become a platform for Chinese merchants to sell to international buyers.

The deal, first reported in The Wall Street Journal on Monday, will give eBay a 49% stake in the new site. Tom Online will have a 51% stake in the site, which will open in 2007, according to the Journal.

EBay will initially contribute $40 million to the venture, and Tom will contribute $20 million, the Journal reported, based on anonymous sources.

About one in three of eBay's largest sellers operate their own e-commerce stores, and many are international entrepreneurs who sell discontinued clothes direct from Chinese factories or vendors who sell millions of dollars of Asian electronics.

International listings accounted for about half of the total value of goods sold on eBay in 2005.

EBay announced earlier this month that it would expand the number of employees in the eBay China Development Center in Shanghai, headed by Daniel Lee, a former senior executive at Yahoo and Hewlett-Packard.

The Tom Online partnership is the latest example of eBay's fluid, sometimes awkward, attempts to crack the Chinese market--the world's second largest Internet market after the U.S.

In September, the company tightened restrictions and registration requirements to reduce fraud among Chinese sellers. EBay has been unable to significantly reduce fraudulent listings in China, home of pirated software, movies and books.

The first public signs of the company's struggles in China came in January 2005, when eBay warned that its annual financial performance would fall short of bullish expectations. The warning prompted a swift market sell-off and unleashed a torrent of investor skepticism, centered mainly on eBay's Chinese operations and difficulty managing global currency fluctuations.

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