Over the next two years, Yahoo is paying $120 million to buy Chinese firm 3721, which is based in Hong Kong. 3721 makes software that is used for internet searches and keywords of the Chinese language.

Acquiring search-related services is key for Yahoo to gain a foothold in China. The software and keywords 3271 enables users to access Roman language domain names on the web. Local web portals have partnered with 3271 and use the software.

The managing director for operations in North Asia, Allan Kwan, says: "The agreement provides outstanding and complementary personnel and technology to support and grow current Internet needs across China and Asia."