Ebay to shut down its China site

Ebay’s expansion dreams in China appeared to be in tatters on Monday night after the internet auction site was set to close its operation in the country and become the junior partner in a new joint venture, according to a person familiar with the matter.

Ebay plans to pull back from the Chinese market and shutter its website, while announcing as early as Tuesday that it will partner with the online portal Tom Online, the person said.

There were no plans to eliminate any jobs in China, they added. The decision was a strategic one aimed at strengthening its position in the region and was not an exit.

But the move would amount to a startling reversal in strategy from that stated by Meg Whitman, chief executive, at last year’s annual analyst day.

“Share of e-commerce in China is likely to be the defining measure of success on the net,” she said.

“There are a bunch of small competitors nipping at our heels, but we are on a tear to be the undisputed winner in China.”

Ms Whitman said that a $100m investment during 2005 in China was “a sign of an unmistakable commitment and an unstoppable determination to be number one in China”.

EBay’s investment went into its EachNet subsidiary, which it had earlier paid $150m to assume full control.

However, it has struggled to gain market share from rival Alibaba.com’s TaoBao auction site.

The Shanghai Daily quoted sources on Friday saying Ebay would soon split its three business units in China.

They said EachNet would still be run directly by Ebay but Kijiji, a platform for users to post free advertisements, would be run independently, while a share of the Paypal online payment platform would be sold to the Tom Group of Hong Kong billionaire Li Ka-shing.

Ebay is expected to contribute $40m to a new venture with Tom for an auction site launching in 2007. It would take a 49 per cent stake in the venture, according to the person familiar with the situation.

An Ebay spokesperson at its Silicon Valley headquarters on Monday refused to comment on what he described as speculation.

About half the value of goods sold on Ebay’s sites comes from its international businesses, but it has not been successful in every market.

In 2002, it withdrew from Japan after failing to make headway against Yahoo’s business there.