The venture, to be called Zhongguancun Software Co., joins the software giant with China's Beijing Centergate Technology (Centek) and Stone Group, the companies said in a statement this week.
Microsoft said that the new company will develop enterprise and government software applications, as well as products based on its .Net technology, for the Chinese and overseas market. The venture is part of Microsoft's commitment to help with the growth of China's IT industry, the company said.
"The establishment of Zhongguancun Software Co. is a positive response to the Chinese government's recognition that the country needs to establish a world-leading software industry," Craig Mundie, Microsoft's chief technology officer, said in a statement.
The world's most populous country, China has long been heralded as an up-and-coming economic powerhouse. Over the last decade the government there has made a strong commitment to growth in a wide range of industries, and late in 2001, the country passed a major hurdle with its admission to the World Trade Organization. Still, some analysts see investments there as risky for some time to come.
This is not the first time Centek and the Stone Group have collaborated. In June 2000, for instance, the two formed one of China's largest software companies, Zhongguancun Software Group, together with Beijing University Founder Group and China Huajian Group, to focus on application development for the finance, security, transportation and management industries.
Listed in China, Centek mainly provides value-added telecom services, while Hong Kong-listed Stone Group offers information-application development.
Zhu Xiduo, former president of the Stone Group, will head Zhongguancun as president; Centek President Duan Yongji will assume the role of the chairman of the board.
The new company has registered capital of $12 million (100 million yuan). Centek is the largest shareholder with a 51 percent stake. Microsoft and the Stone Group hold 30 percent and 19 percent, respectively. The company will be based in Beijing's Zhongguancun Software Park.
Ernest Khoo reported from Singapore.