Baidu and a Japanese e-commerce operator called Rakuten have expanded their entrepreneurial reach by establishing China's largest online mall in Beijing's Tongzhou district on April 23.

On January 27, the two companies announced they would invest $50 million for three years to create this online mall, in which Rakuten holds a 51 percent stake and Baidu 49 percent.

The JV is named Lebai Online Technology Co., Ltd. The board of directors will consist of members from both sides, while the CEO will be Koichi Nakamura, the former COO of Rakuten.

The Sino-Japanese venture is expected to begin operations in July, by following Rakuten's successful model by hosting large retail companies and supply small- and medium-sized enterprises with e-commercial services as well, as advertising, online payment and logistics. Mall services will be launched first, followed by individual private retails.

Ren Xiaoxu, vice president responsible for Baidu's business expansion, said the Chinese search engine helps small- and medium-sized enterprises market themselves. Now it can directly provide an e-commercial platform for those enterprises. Thus, B2C (business to consumer) becomes the focus of Baidu's e-commerce strategy.

Ren also said the reason for choosing Tongzhou for the JV's location is because of the preferential policies offered by the local government. As China's international e-commerce demonstration base launched in February 2010, Tongzhou is the location for many trials developing e-commerce enterprises. The district authorities not only provides tax and finance support to e-commerce companies registered in the area, but also gives special awards for attracting talent.

Insiders think the JV between Baidu and Rakuten will make the B2C market more competitive.

Established in 1997, Rakuten adopted the B2B2C operating model, focusing only on maintaining the online mall. Koichi Nakamura revealed that, as Japan's biggest commercial company,Rakuten's business volume hit 1 trillion yen($10.60 billion) last year.

Statistics from China Internet Network Information Center showed that China's online trade in 2009 reached 248.35 billion yuan ($36.38 billion), up 93.7 percent from 2008, and is expected to reach 1 trillion yuan in 2013.