Google is investing $550 million in Chinese e-commerce giant JD.com

(Reuters) – Google will invest $550 million in Chinese e-commerce powerhouse JD.com as part of the U.S. internet company’s efforts to expand its presence in fast-growing Asian markets and battle rivals including Amazon.com.

Both companies described the investment announced on Monday as part of a broader partnership that will include the promotion of JD.com products on the Google shopping website. This could help JD.com expand beyond its base in China and Southeast Asia and establish a significant presence in U.S. and European markets.

U.S.-listed JD.com shares rose 0.4 percent to close at $43.76 on Nasdaq.

Company officials said the deal would not initially cover any new, major Google initiatives in China, where the company’s core services are blocked over its refusal to censor search results under local law.

JD.com’s investors include Chinese social media powerhouse Tencent Holdings Ltd, a key rival of Chinese e-commerce leader Alibaba Group Holding Ltd and Walmart Inc.

The partnership not only allows Google to strengthen its retail ambitions in China, but also allows it to further strengthen its relationship with Walmart. Analysts say the two companies could work together to challenge Amazon and Alibaba’s dominance in key markets around the world.

Google has partnered with Walmart on multiple fronts over the past year. In August 2017, the two companies teamed up to offer hundreds of thousands of Walmart products on the voice-controlled Google Assistant platform to counter Amazon’s dominance in the voice shopping market. (https://goo.gl/fsZk2g)

In March, Reuters reported on a new program in which Google partnered with retailers such as Walmart, allowing them to list their products on Google Search, as well as on the Google Express shopping service, to better compete with Amazon.

According to reports, Google is also considering taking over shares in the Indian company Flipkart, where Walmart acquired a 77% stake for $16 billion.

Google declined to comment on the Flipkart deal rumors.

STRENGTHENING INVESTMENTS IN ASIA

Google is increasing its investments in Asia, where a rapidly growing middle class and a lack of infrastructure in retail, finance and other areas have made it a battleground for US and Chinese internet giants. Google recently acquired a stake in the Indonesian ride-hailing company Go-Jek.

The investment in JD.com is made by an operating unit of Google and not by one of parent company Alphabet’s investment vehicles.

As part of the deal, Google will receive 27.1 million newly issued shares of JD.com’s Class A common stock. That would give it less than a 1 percent stake in JD, a JD spokesman said.

For JD.com, the deal with Google shows a determination to build a set of global alliances as it tries to counter Alibaba, which has been more focused on creating domestic retail tie-ups. Alibaba’s main investor is the Japanese group SoftBank Group Corp, which makes large internet investments around the world.

Morningstar analyst Chelsey Tam said the investment will help JD.com expand into developed markets such as the United States and Europe, where it has less exposure compared to Google.

“The partnership with Google opens up broad opportunities to offer premium retail services to consumers around the world,” Jianwen Liao, chief strategy officer of JD.com, said in a statement.

Company officials said the deal would combine Google’s market reach and analytics strength with JD.com’s logistics and inventory management expertise.

The investment could give Google access to more consumer data that can be used to increase the use of Google Shopping, Morningstar analyst Ali Mogharabi said.

(Reporting by Jonathan Weber and Munsif Vengattil; additional reporting by Nandita Bose in New York; editing by Stephen Coates and Tom Brown)