Microsoft invested US$20 million in a Beijing-based domestic software firm yesterday, aiming to strengthen its commitment to the Chinese market and tap into the nation's software engineering talent pool.

International Finance Corp (IFC), an investment arm of the World Bank, also invested US$15 million in the same firm, ChinaSoft International Ltd. The company is under the control of the state-owned China National Software and Service Co Ltd (CS&S).

The parties involved declined to disclose how big the stakes of Microsoft and IFC are. ChinaSoft International is valued at HK$788 million (US$101 million) on the Growth Enterprise Market in Hong Kong. The trading of ChinaSoft International's stocks was suspended yesterday because of the issuance of new stock to the two firms. Its stocks closed slightly higher on Friday at HK$1.13 (17 US cents), from HK$1.12 on Thursday.

"We have been searching for a model of development in China, but with this investment into ChinaSoft International, we have found our way," said Tim Chen, the CEO of Microsoft China, in Beijing.

ChinaSoft International is the second Chinese software firm that Microsoft has invested in this year. The first was the Langchao Group in East China's Shandong Province, which got US$25 million from the firm.

Chen said the investments showed Microsoft's confidence in its long-term prospects in China. He said previous activity was mainly focused on sales, local development, and technological co-operation.

He added that the move also showed his firm's commitment to bringing Chinese software firms to the international marketplace.

Microsoft signed an agreement with the Chinese Government in 2002 to invest US$750 million in China in three years, believed to be a major move to win trust in China, its biggest potential market.

Microsoft made all its Xbox game consoles in China last year, generating an output value of 8 billion yuan (US$989 million).

It also signed up with four global strategic partners, giving outsourcing orders to them and training almost 1,000 engineers for Chinese firms. This has also helped the software giant reduce its development costs.

Microsoft held a Tech Ed 2005 in Beijing on Friday to demonstrate its new products to Chinese customers and developers.

Tang Min, chairwoman of SCS&S and ChinaSoft, said: "China's software industry is facing an unprecedented opportunity in the world and is at the turning point of its transition."

(China Daily September 27, 2005)