From Danwei blog (link):
From a global perspective, the possible benefits of such an alliance are clear. In China, on the other hand, it gives birth to a perplexing situation: eBay’s largest competitor in soon-to-be the world’s largest online market is TaoBao.com. TaoBao.com is owned by Alibaba.com. As it happens, Yahoo! owns 40% of Alibaba, and Alibaba is responsible for all of Yahoo!’s activities in China.
This means that Yahoo! China is both eBay’s biggest competitor and its strategic partner.
The war between TaoBao.com and eBay.com is probably the bloodiest one in the short history of China’s internet. Both companies are pouring money on advertising like there’s no tomorrow. eBay throws in the cash money it made in other countries, and TaoBao.com is spending the US 1 Billion its parent company received from Yahoo!. eBay is lagging behind TaoBao and earlier this year was forced to change its business model and stopped charging sellers a transaction fee.