Groupon's China Gamble

Groupon Inc.’s new Chinese deals website is the latest test of whether foreign Internet companies can make it in China. While the company has the backing of China’s largest Web player, it is entering a market with a number of challenges.

China has more Internet users than any other nation, but the market here is tightly regulated by the government. And as fragmented as the online local deals business can be in the U.S., local competitors say it’s even more so in China where everything from household income to tastes in food vary widely from city to city.

Groupon, which sells daily coupons on meals, spa visits and other local deals, launched in partnership with Tencent Holdings Ltd. and private equity firm Yunfeng Capital on Monday. The new site’s name appears to be taken from a Chinese phrase meaning “cherished friend sitting around the table.”

Chicago-based Groupon’s Chinese site will be up against hundreds of Chinese group-buying and local-deals websites—plus related services provided by Taobao, the online marketplace of Alibaba Group.

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