BEIJING, Aug. 11 (Xinhuanet) --  China's largest e-commerce website Alibaba has signed an agreement with Yahoo to acquire Yahoo China and sell 40 percent of its shares to Yahoo at the price of 1 billion dollars.

    "Most of the one-billion-dollar investment will be spent on development of searching engines," said Ma Yun, chief executive officer of Alibaba, at Thursday's press conference.

    He denied the popular view that Alibaba made the deal with Yahoo in order to get prepared for going public.

    "We are not so enthusiastic for the initial public offering though we are sure to get listed in the future," Ma said.

    As the second largest Internet market in the world, China has over 103 million netizens. A report from Beijing-based Analysis International estimates that China's e-commerce market will reach 620 billion RMB (76.5 billion US dollars) in 2005.

    "The future e-commerce must depend on on-line searching and Alibaba's goal next year is to give Chinese people access to a world level searching engine," said Ma.

    The package of Yahoo China's assets includes Yahoo's search technology, the website of Yahoo China, its communication and advertising business, as well as 3721.com, a Chinese language search engine.

    Alibaba and Yahoo will aim to find a search engine more powerful than Google's, said Ma.

    The new Alibaba Company will have four seats in its board, two from Alibaba, one from Yahoo and one from SoftBank, a major investor in Alibaba.

    The big deal between the two Internet giants is believed to bring another tumult to China's Internet industry.

    "Their successful cooperation not only means the largest investment from multi-nationals into China's technology companies ever, but also brings great influence to online auctions, Business-to-Business (B2B) models and the search engine market," said Yu Yang, president with Analysis International.

    The deal would definitely put Baidu.com, a powerful Chinese searching website listed on NASDAQ last week, under heavy pressure, said Lu Benfu, expert of the Internet Industry with the Chinese Academy of Sciences.

    Yahoo China's searching website of 3721 and Alibaba's B2B service are both for small and medium-sized companies, which would threaten Baidu's ranking in the market, Lu said.

    He predicted that a Chinese service market targeting small and medium-sized companies would be more competitive.

    Alibaba, a Hong Kong-headquartered Chinese company founded at the end of 1998, has become the world's largest online trading market, with 100 million dollars in cash.