Amazon's China unit in merger talks with NetEase's Kaola

Amazon.com Inc’s Chinese joint venture is in talks about a merger with local e-commerce firm Kaola, which sells imported products in the Asian country, business magazine Caijing reported on Tuesday.

Kaola, owned by Nasdaq-listed NetEase Inc, sells apparel, household appliances and other products, and is the biggest among Chinese shopping sites that focus on imported goods, followed by Tmall Global and JD Worldwide, according to a report from consulting agency iiMedia.

It buys goods directly from overseas manufacturers and last year it imported more than 5,000 brands from 80 countries.

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Amazon told Reuters it did not comment on market speculation. NetEase declined to comment.

NetEase shares rose 3.5 percent to $235.50 in early trade in New York.

While Amazon’s profits and sales are growing strongly, it has pumped billions of dollars into developing markets including India and China in the hopes of generating future profits. Its international operating loss dipped to $642 million in the fourth quarter from $919 million a year earlier.

E-commerce is more attractive in China than in other markets, in part because Chinese consumers say they buy products online more for convenience than price, according to a report by Boston Consulting Group.

But operating in China, at a time of rising trade tensions between Beijing and Washington, has proven a hard nut for U.S. tech heavyweights to crack.

Uber sold its China operations to bigger local rival Didi Chuxing in 2016, after a bruising two-year battle. Alphabet Inc’s Google, which quit China in 2010, has been seeking ways to re-enter a market where many of its products are blocked by regulators.

As of mid-2018, China’s Alibaba Group Holding led the e-commerce market in the world’s second largest economy with a 58.2 percent share, followed by local rival JD.com. Amazon was a distant seventh with a less that 1 percent market share, according to research firm eMarketer.