Liu Chuanzhi, chairman of Legend, the country's largest producer of PCs, announced on Tuesday that his company "is in negotiations with America Online Inc to explore the possibility of establishing an Internet-related services joint venture targeting customers in the Chinese mainland.''

Legend's chief executive Yang Yuanqing revealed on the same day in Taipei that his company had been talking with AOL for some time and detailed plans would be made in a few days.

Lu Benfu, director of China Internet Development and Research Centre under the Chinese Academy of Social Sciences, was optimistic about the potential impact of the deal.

"It will be epoch-making,'' he said. "The deal is important because it will provide a new and practical business model for the Chinese Internet industry.''

Lu explained that a Legend-AOL venture, if successful, would prove to Chinese Internet portals that there are other sources of profit besides advertising.

AOL, provides a wealth of content and charges customers for an Internet connection fee, stands in sharp contrast to most portals in China, which offer free services but which have been criticized for poor content.

Lu predicted the new joint venture would change the fates of Chinese portals like Sina and Sohu within a year.

Wang Yan, new president of Sina, welcomed AOL-Legend project, saying: "I wish to cooperate with them and with every player in the industry.''

According to reports, the two companies will each contribute US$100 million to the venture, which could be built on the basis of Legend's website--FM365.com, already a major portal in China.

(China Daily 06/07/2001)