Microsoft, Baidu form paid-search partnership

Under the terms of this agreement, Baidu's paid search listings will appear on the search results pages of the Chinese versions of Microsoft sites such as MSN and Live Search. This is expected to go into effect later this month.

Baidu, which recently announced a decision to expand its reach to Japan, is the largest Chinese-language search engine. According to Web traffic-ranking site Alexa, it's also the fourth-most-visited site in the world. Microsoft is by no means the first United States-based company to show an interest in partnering with such a major player in China's growing Web market: indeed, Intel's Chinese division inked an agreement with Baidu earlier this year.

Other companies, as well as venture capitalists, have taken a financial stake in Baidu's promising future. Among these was search king Google, which invested in Baidu prior to the Chinese company's August 2005 initial public offering. Google later sold its 2 percent stake, citing its own China ambitions.

"We have disposed of our modest investment in Baidu," Google spokeswoman Debbie Frost confirmed in July. "It has always been our goal to grow our own successful business in China, and we are very focused on that," she said.