"This integrates everything," including Microsoft's Hotmail and instant messaging products, a browser, and access to a tailored-for-China version of the MSN portal, said Celia Chong Wu, general manager for Microsoft's MSN operations in Asia.

She noted that the China-targeted site will be hosted in the United States, meaning its Web address -- china.msn.com -- does not carry the .cn suffix.

"I'd be surprised if there were any regulatory issues," she said in an interview.

Foreign firms are not allowed to own Chinese Internet content providers, although many foreign sites are accessible and popular in the mainland. Beijing sporadically blocks foreign Web sites carrying content it considers politically sensitive, including cnn.com and nytimes.com.

Chong said content on the mainland-focused MSN site will be mostly technical at first -- heavy on Microsoft product information. The site will not initially carry news.

Microsoft's China Internet effort will be packaged with the XP version of its Windows operating system, and will also be available for download on the Internet.

Microsoft's low-key, go-it-alone mainland Internet approach contrasts with the June announcement by AOL Time Warner's America Online and top Chinese PC maker Legend Holdings of a US$200 million China Internet joint venture.

That alliance will initially see America Online provide technical support and service to Legend's mainland portal, with a broader effort once regulations permit.

"They haven't come out with anything," Chong said of the AOL/Legend tie-up.

She also noted that Legend is a manufacturing partner of Microsoft, and that the Legend/AOL deal is not exclusive.

Steve Yap, director at Hong Kong-based Internet audience measurement firm iamasia, said China is one of the very few major markets where Microsoft sites -- or any foreign sites -- are not among the top Web traffic generators.

Instead, local players such as Sina.com, Sohu.com and NetEase Inc dominate the mainland Web, partly because foreign firms were slow to establish presences there, given the restrictions. That allowed local players a significant head start, Yap said.

"In the past they (Microsoft) have been somewhat hesitant, I would say, in approaching the mainland market," he said. "This could be a sign of bigger things to come from the Microsoft standpoint."

Hotmail has enrolled 2.2 million users in China since the e-mail service was launched there late last year, Chong said.

Yap said Microsoft's latest mainland move is consistent with its overall strategy: "They're trying to make the desktop seamlessly linked with the Internet."

But Merrill Lynch technology analyst David Cui said Chinese Internet users are sophisticated, and will search out the content they want, "rather than what you feed them."

Local content, not translated overseas fare, is key to success on the mainland, Cui said.

"Generally, I tend to think overseas Web sites -- even Yahoo -- you wouldn't say they are fantastic successes in China," Cui said. "The top portals in China are always done by locals."

And success in luring users on China's Internet has thus far not equated to profits, with all of the Nasdaq-listed mainland portals losing money as advertising revenue is scarce.

(chinadaily.com.cn 09/18/2001)