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The US search giant Google announced its formal plans to enter the Chinese market with the appointment of new head of its Chinese operations and the establishment of a development centre in China, one day after it was sued by Microsoft.

Google said yesterday that it will set up a China research and development centre this quarter and appointed Kai-fu Lee, a Microsoft corporate vice-president, as Google China president and head of the new centre.

The search giant said the Chinese market, as the world's second largest Internet market in terms of netizens, is one of the most important areas in its global expansion plans.

The huge talent pool in China, especially computer-major college graduates, is another reason that Google has decided to establish an engineering centre here.

"Google has also just found the perfect person to lead our growing Chinese operations, so it seems the time is right for us to begin to set up such a centre," the US giant said in a written statement.

Lee joined Microsoft in 1998 and started the Microsoft Research Asia in China. The centre became one of Microsoft's best research organizations worldwide and Lee was also promoted to vice-president in charge of natural interaction services, the highest-ranking Chinese in the US software giant.

He has extensive and intensive relations with the Chinese Government, scientists and engineers, as well as the Chinese information technology arena.

Google did not specify how much it will invest in the centre and the Chinese operation, but said the Chinese centre will be basically a mirror of Google's operations. Another key task is to develop innovative products for the Chinese and global markets.

Sun Lilin, a senior Internet analyst with Beijing-based market research house Analysys International, said that starting its expansion in China with the establishment first of an engineering centre is a sign of Google's long-term commitment to the Chinese market and would win trust from the Chinese Government. The firm's services have been blocked many times in the past due to violations of Chinese regulations.

Henry Yang, president of Shanghai-based professional Internet market consulting firm iResearch, also pointed out that Google is no longer purely a search engine service provider, but is penetrating into different areas of Internet services.

China, with successes in some areas like mobile short messaging services and online games, is a good place for Google to acquire talent and inspiration for development.

Both analysts believe the appointment of Lee and the establishment of the engineering centre will allow strong enhancement for Google's expansion in China.

According to iResearch, the Chinese firm Baidu, known as China's Google, had the highest penetration rate of 44.7 per cent, while Google follows Baidu with a 30 per cent market share.

The appointment of Lee has also enraged Microsoft and it filed a lawsuit against Lee and Google on Monday.

"Accepting such a position with a direct Microsoft competitor like Google violates the narrow non-competition promise Lee made when he was hired as an executive," Microsoft said in its filing.

"Google is fully aware of Lee's promises to Microsoft, but has chosen to ignore them, and has encouraged Lee to violate them," the filing said.

Google responded with a statement on Tuesday, saying Microsoft's claims are "meritless" and is vowing to defend Lee vigorously with its full support.