Changhong Electric said in a statement on Monday that Microsoft will take a 94-million-yuan ($12.3 million) stake in the firm by purchasing 15 million new shares.

Changhong said in the statement,

Cooperating with Microsoft on this project will benefit Changhong by strengthening our competitiveness in the area of information home electronics.

Changhong Electric is reportedly one of the few Chinese companies working to merge TV functions with computers and the Internet.

Online gaming is hugely popular in China. Beijing-based analyst firm CCID Consulting estimates that there are 17.8 million fee-paying gamers in China, about 20% of which are under 20 years old.

This is a smart move by Microsoft to invest into this specific market in China. With their Xbox 360 gaining ground everyday and undoubtedly being one of the best online console platforms around, this investment will help them gain shares in a vital and huge gaming market and could result in Microsoft becoming a media giant in China.

China's gaming scene is so serious that it is starting to become a problem. According to BBC, online game companies based in China have been given three months (from April 2007) to install the so-called anti-addiction software. Under-18s who play for more than three consecutive hours a day will have limits imposed on the amount of points they can score.

With such a large online gaming market comes huge revenues. However, the online gaming platform could be a trojan horse to help Microsoft become a media giant in China. You can already download videos and trailers from Xbox Live services.

If enough gamers in China subscribe to Xbox Live or whatever this partnership results in, this service could become a cheap and efficient way to deliver content to the key demographics of teens and tweens.