It said the move was a milestone in cashing in on the nation's growing software industry.

Microsoft's two local partners -- the domestically listed Beijing Centergate Technologies Holding Co Ltd (CENTEK) and Hong Kong listed Stone Group -- hold 51 percent and 30 percent respectively of the Zhongguancun Software Company, which has a registered capital of 100 million yuan (US$12 million). All three parties invested in cash.

CENTEK President Duan Yongji will chair the board, and Zhu Xiduo, former president of Stone Group, will assume the presidential position. Microsoft will recommend a chief technology officer for the joint venture, which will be based in Beijing's high-tech hub, Zhongguancun Park.

The new company will develop enterprise and government application software based on the resources of the three parties, provide system integration services for enterprises and government departments, and offer software outsourcing, training and consultancy services, said Zhu.

"The business development model for the company will be unique," he said. "We expect to turn it into one of China's largest software enterprises and software exporters in five years."

CENTEK has a strong governmental background, a rich access to business opportunities and a state-of-the-art data centre. Stone Group excels in its expertise in system integration and information technology (IT) services.

Although Microsoft's US$2.2 million investment in the company allows it to control 19 percent, company officials lauded the move as a milestone ins its newly unveiled Great China Region Strategic Business Development (SBD) plan, which aims to promote strategic investment and partnership in China, and facilitate its local IT partners to develop both the Chinese and international market.

"This is the first software company that Microsoft invests in and supports," said Craig Mundie, svice-president and chief technology officer of Microsoft.

"We strongly expect the form of the company will set up the model for further cooperation in the developing software industry," he said.

"We do not rule out the possibilities of acquiring local software companies or setting up new joint ventures in the future."

The partnership comes amid a time when China's software industry, driven by the nation's robust economic growth and the strong demand on IT spending, is emerging as one of the world's top software export bases, analysts said.

The widely lauded accession to the World Trade Organization and Beijing's success in bidding for hosting the 2008 Olympic Games are expected to bring significant changes to its economy, which is bound to fuel a huge demand for advanced IT products and application software.

(China Daily January 17, 2002)