E-Commerce Competition Intensifies in China TOKYO - An arms race between the two most powerful Internet companies in China has escalated again, with one of them, Tencent, announcing an investment that pushes it further into e-commerce - territory long controlled by its rival, Alibaba. Tencent said late Wednesday that it would pay about 1.5 billion Hong Kong dollars, or $193 million, for a nearly 10 percent stake in China South City Holdings, which operates warehouses and factory outlet malls, and provides a variety of other logistical services to retailers. Both companies are listed in Hong Kong. Until recently, Alibaba and Tencent seemed largely content to develop their own areas of expertise without moving too aggressively onto each other's turf. Alibaba owns e-commerce sites like Taobao and Tall, while Tencent operates messaging services like QQ and WeChat. But over the last year or so, with Alibaba positioning itself for an initial public offering of shares and Tencent eyeing the lucrative earnings from the boom in online retailing in China, the companies have been pushing aggressively into each other's traditional areas of dominance. "Tencent is absolutely trying to get more aggressive in the e-business space, challenging Alibaba, as most of their services are now overlapping,'" said Bryan Wang, an analyst at Forrester Research. In October, Jack Ma, the chairman of Alibaba, announced that he was shutting down his WeChat account and urged followers to do the same and switch their allegiance to a new Alibaba messaging service called Laiwang. Last week, Alibaba announced plans to set up a mobile game platform, where it will offer applications developed by outside programmers, sharing the revenue with them. Tencent generates more than half its revenue from games. It offers most for free but relies on the vast reach of WeChat, which says it has more than 270 million active monthly users, to fuel demand for subsequent in-game purchases by people determined to stay ahead of their friends. The video game market in China grew by 38 percent last year, to $13.8 billion, according to a government agency that monitors the industry. Mobile games were the fastest-growing segment, with revenue more than tripling, to $1.8 billion. E-commerce is a much bigger business. Last year, sales in China, including online transactions between businesses, rose to $335 billion from $221 billion in 2012, according to an Alibaba research center. On one day in November when Chinese online retailers run a bevy of promotions, the company recorded $5.75 billion in transactions through its online payment system. But Alibaba is not stopping there. In December, the company said it was investing about $360 million in Haier Group, one of the leading appliance makers in China. The companies said they would set up a logistics joint venture that would support Alibaba's delivery operations. Alibaba also struck a deal last year with Sina Weibo, the operator of a microblogging platform, that is aimed at countering the popularity of WeChat and driving more users to Alibaba's e-commerce platforms. Tencent has responded with investments of its own, including the purchase of a stake in a search engine called Sogou. And the company has moved to build up its own e-commerce capabilities, which include sites like 51Buy and QQ Wanggou, by adding a payment feature to WeChat. Tencent said the agreement with China South City would enhance its e-commerce capabilities. The companies said they would work together to help small and midsize companies develop their online retail operations. "Cooperation with China South City enables us to jointly facilitate such enterprises migrating online, utilizing China South City's physical locations and logistics capabilities, together with Tencent's Internet user platforms and technology capabilities," Martin Lau, the president of Tencent, said in a news release. In addition to warehouses and other logistical facilities, China South City operates factory outlet malls featuring brands like Nike and Adidas. Tencent and China South City said in a statement that they would "explore opportunities for cooperation with respect to online outlet services for branded goods." Both Tencent and China South City have their headquarters in Shenzhen, China.