AOL enters into China joint venture

America Online has entered into a joint venture with Chinese computer maker Legend Holdings aimed at providing Internet services in the world’s largest market.

Both parent companies will put $100 million into the venture, though Legend will own 51% and AOL 49%.

According to a press release, the venture was formed to combine AOL’s experience in the creation and marketing of online services for mass markets with Legend’s knowledge of Chinese markets. Currently, Legend owns almost 40% of the Chinese PC market, where it pre-installs Internet connection services and portals into consumer PCs.

Limited by Chinese regulations, the joint venture will initially provide interactive service consultation and technical support. However, the parent companies expect to gradually expand the venture’s activities, should China become a member of the World Trade Organization.

Any easing of government regulations brought about by WTO status, however, are likely a long way off, said Rudy Bacca, global strategist with the Precursor Group. China’s first proposal to the organization, in fact, would have extended heavy restrictions on foreign investments for more than 15 years, he said.

In addition, price and content regulations in China further limit the short- and medium-term prospects of the market.

“It expands their technological base, but how are they going to make money there? They’re prohibited from delivering Time Warner content by the government. I don’t know how they’re going to make money,” he said.