The agreement with eBay includes an option for the company to raise its stake in Eachnet, though Eachnet vice-president Grace Wu said further details such as the time-line for such investments would not be revealed until the formal announcement in Beijing next week.

Before the eBay investment, Eachnet had raised US$26.5 million in venture capital financing, helped largely by the glamour value of co-founders Yibo Shao and Haiyin Tan, who met while studying at Harvard Business School.

The last round, US$20.5 million raised in late 2000, was one of the last large foreign investments in China's Internet sector and followed a summer when Eachnet announced acquisitions of several of its smaller rivals.

In a country where credit card use is low and online settlement systems are in place but have not caught on, about half of Eachnet's transactions are settled face to face and sellers always list the city they are in.

The rest settle by other means, including postal-system remittance and third-party electronic settlement systems that Eachnet plugs into.

Plans for co-operation between the two companies include the addition of eBay chief Meg Whitman and senior vice-president Matt Bannick to the Eachnet board.

Ms Wu said cross-promotion such as the linking of the two companies' sites had still to be determined.

Eachnet charged a listing fee of one yuan (about 94 HK cents) to eight yuan for each item, and would not change its marketing or business plans for now, she added.

Eachnet's primary objective in linking with eBay was to boost its war chest for marketing and educating Chinese users about online auctions, Ms Wu said.

'The second consideration is to be able to access eBay global know-how and expertise, so it's going to shorten our learning curve.'

The US firm is looking to increase its foothold in a region where personal computer penetration and Internet use continues to grow.

The company has launched in Singapore and Japan, in addition to the recent investment in Taiwan. However, in Japan the company struggled against the better-established Yahoo! auction service, so it plans to close its Japan operations at the end of this month.

To take full control of Taiwan's NeoCon Technology, eBay paid more than US$9.5 million in cash. It has set up links to NeoCon's uBid site on its home page.

Patrick Hardy, a partner at law firm O'Melveny & Myers, which advised Eachnet on the deal, said eBay's investment in Eachnet would be through an offshore holding company.

Existing Eachnet shareholders, such as Whitney & Co, AsiaTech Ventures and Orchid Asia, were diluted in the recent agreement, though numbers were not disclosed.

Mr Hardy said the completion of eBay's investment in Eachnet was one of the first foreign equity deals in China's Internet sector to be announced in months, but more were under negotiation by multinational companies and could be completed later this year.

While there were several high-profile venture capital deals in 1999 and 2000, last year saw only a handful of large foreign deals.

These included AOL Time Warner's multi-million-dollar joint venture with Legend and the purchase of China portal Myrice by Lycos Asia.

Chinese Government statistics estimate there are 33.7 million Internet users nationwide.

Business-to-consumer commerce through the Web, however, is still in its early stages, with most of the country's Web sites relying on advertising revenue for the majority of income. Web portal Sohu.com completed US$700,000 worth of transactions in the fourth quarter last year, the majority settled by cash on delivery.