Forming a multi-faceted e-commerce business to serve China, Yahoo Inc. is investing about $1 billion in cash for a 40% stake in Alibaba.com to engage in several areas of e-commerce including online payments, search and b2b and b2c e-commerce, the two companies said today.

The Yahoo/Alibaba partnership will include the Yahoo China e-commerce portal and advertising services, Yahoo Search Technology, the Alibaba International online marketplace, and the Taobao e-commerce site. “Together, we will create one of the largest Internet companies in China, and our combined assets will make us the only company that has a leading position in all the key sectors that are driving explosive Internet growth in China such as search, commerce and communications,” said Yahoo chairman and CEO Terry Semel.