If Yahoo! acquires a stake in China's B-B ecommerce portal Alibaba, the stage will be set for a very heated battle between Yahoo! and eBay for China in particular and Asia as a whole. Yahoo! dominates the auction market in Japan while eBay has had great success in Korea. But China is a whole new frontier.

According to the NY Times, "Microsoft, Yahoo, Google, eBay and Amazon.com are scrambling to invest money or find strategic partners in China, where there are an estimated 100 million Internet users amid a population of 1.3 billion. By some forecasts, China will overtake America with the largest number of Web surfers as early as 2010."

One thing the article doesn't mention is the potential for cross-border trade in Asia. Winning the China market is key to becoming a de facto ecommerce standard throughout Asia. Alibaba also has a Japan site and an English-language site. It could be a very nice fit for Yahoo!, but it won't come cheap; the estimate is that Yahoo! will have to cough up $1bn for a 35% stake.

UPDATE: All news reports so far indicate that Yahoo! will indeed be going to the bank to get a piece of Alibaba -- and letting Alibaba take over Yahoo! China.

This is from the WSJ: "Alibaba, a closely held company and rival to eBay, operates Web sites to help small and midsize merchants connect with wholesalers, manufacturers and other sellers in China. Alibaba also operates TaoBao, a free Web site for individuals to trade through fixed-price or auction transactions. TaoBao holds 30% of the China online auction market, while eBay holds about 65%, according to Shanghai iResearch, an Internet market-research firm."