(Yicai Global) Feb. 20 -- Chinese internet behemoth NetEase struck a tentative deal with Amazon.Com at the end of last year to acquire its cross-border online shopping business, reportedly in the form of a share exchange.

Hangzhou-headquartered NetEase's e-commerce platform Kaola will merge with Amazon China's Haiwaigou ('buy overseas') international online shopping portal to offer more foreign products to Chinese consumers through Seattle, Washington-based Amazon's global supplier network and trans-national logistics system, financial magazine Caijing reported yesterday.

Kaola initiated and drove the deal, which the two clinched at the end of last year after months of talks, a source said, adding it may be a stock-for-stock merger.

Kaola and Amazon China both declined to comment.

"Amazon needs a fairly strong local operating partner in China. NetEase has an e-commerce gene and shares Amazon's philosophy. Amazon itself can't adapt to the local market. It has funds, technologies and business models, but lacks localized operations," one fund partner explained.

Amazon China inaugurated its cross-border business in 2014. It allows consumers to buy products from Amazon's branches in the US, UK, Japan, and Germany directly through its China website. Amazon's global logistics system then delivers them from its overseas centers.

Formed in early 2015, NetEase Kaola mainly plies cross-border e-commerce. It entered the integrated online shopping market in June last year, selling both imported and domestic wares.

China's trans-national import and retail online market was CNY114.6 billion (USD17 billion) in the fourth quarter, up 36 percent from the one before, data from research firm Analysys show.

Tmall Global operated by tech titan Alibaba Group Holding stayed in first spot with a nearly 32 percent market share, followed by Kaola at 25.5 percent. Amazon's cross-border business came in fifth at 6 percent.

NetEase's cooperation with Amazon China will diversify its product line, lower customer acquisition costs and build an effective supply chain, pundits believe.

Editor: Ben Armour