Alibaba to invest in cloud computing arm

China's Alibaba Group Holding said it would invest $1 billion into its Aliyun cloud computing arm to challenge Amazon.com Inc's lucrative Web Services division, opening a global front in the battle between the two e-commerce giants.

With the global cloud computing market estimated by analysts to be worth about $20 billion, Alibaba said in a statement the investment would go toward setting up new Aliyun data centres in the Middle East, Singapore, Japan and Europe. The firm also plans to strike business partnerships with telecom and enterprise technology providers in those regions.

Although Alibaba and Amazon have so far avoided competing directly in their core business of e-commerce outside China, Aliyun's international expansion takes aim squarely at Amazon Web Services (AWS), an increasingly central and profitable division of the Seattle-based company.