Chalk up another ignominious retreat for an American Internet company that once nursed grand China dreams. The conventional wisdom in the tech salons of Beijing (and, as I must now concede, Shanghai) has for some time been that eBay's days in China were numbered. Lo, the conventional wisdom has, despite its spotty record in China, come through. eBay will be working hard to position its deal with China's Tom.com as anything but a retreat. But make no mistake: it's a retreat.

Bloomberg has the gory details:
EBay Inc. will close its primary China Web site and form a partnership with billionaire Li Ka- shing after losing users in the world's second-biggest Internet market, a person familiar with the situation said.

The world's largest online auctioneer will pay about $40 million for a 49 percent stake in the venture with Li's Beijing- based Tom Online Inc., an Internet company that sells services such as ring tones for mobile phones, said the person, who declined to be identified because the agreement isn't public. Tom Online shares were suspended, pending an announcement.

EBay will shut the China site after almost five years in which it lost market share to local rivals that offer free services. The San Jose, California-based company started operating in China following the closure of its Japan site in March 2002, and a month after it opened in Taiwan. In June EBay closed its Taiwanese site to form an auction venture with PC Home Online.

This sounds a lot like eBay (and yes, I use a different spelling convention than Bloomberg) is paying Tom.com to take their China operation off their hands. If you've been following China's Internet scene you may recall Yahoo doing something similar in 2005, when they paid Jack Ma's Alibaba a cool billion to take the struggling Yahoo China. True, Yahoo got a minority stake in Alibaba, one of China's most energetic Internet companies as well. But they also surrendered control of their brand in China to company that does not always see eye to eye with them. Indeed, recent management changes at Yahoo China have accompanied swirling rumors of strategy disagreements between Yahoo's Jerry Yang and the Yahoo China management team.

Still, eBay may find that paying off Tom.com makes sense for them. True, Tom.Com's e-commerce credentials aren't exactly thumping, but at least they can claim some insight into China. Plus eBay didn't part with anywhere near as much money as Yahoo did. Of course, Yahoo got a stake in Alibaba, the promising parent company, while eBay is taking a stake only in the joint venture that it is creating with Tom.com. In fact, it's a comment on the poor value of the eBay brand in China that it had to throw in any cash at all for a minority stake in an unproven joint venture with a second-rate China Internet power.

Funny, also, how Alibaba plays a starring role in both these dramas. It is, after all, Alibaba's Taobao auction site that has been so thoroughly pantsing eBay in China.

eBay is taking 49% of the joint venture, which is Chinese global [see comment] business code for not having any control whatsoever (and possibly not even much influence). It'll be interesting to see if this new project goes anywhere, especially considering that eBay China will be dark for a while before they launch. If I were a betting man, I'd keep my money on Taobao.

I'd also start a pool on the chances for MySpace China, an idea that News Corporation has been actively flirting with. Personally, I don't give them much of a chance. The road to Internet riches in China is paved with corpses of American giants, and the body count continues to grow.

 Note: Also CNET 50.