An insider from the Chinese Internet company Tencent has confirmed to the local media that the American collective buying website Groupon will establish a joint venture with Tencent to enter the Chinese market, and the CEO of the new company will be assigned by Tencent.

Groupon and Tencent will apparently set up a joint venture on the Chinese mainland to develop the collective buying market and each company will own a 50% stake.

Prior to this, an email sent by Groupon’s vice president Mads Faurholt-Jorgensen revealed that the company plans to increase the number of its Chinese employees to 1,000 over three months. In addition, its current office in Beijing cannot meet its fast expansion and the company is seeking new working place. Groupon’s Chinese social media website will reportedly be launched soon and the company aims to become the top collective buying website in China by May 2011.

Groupon usually expands into markets outside the U.S. by acquiring the largest collective buying websites in the local markets and renaming them under the brand name of Groupon. With this model, Groupon has entered the markets of Hong Kong, Taiwan, and Singapore. The cooperation with Tencent shows that the company will enter the Chinese mainland market in a new way. Its entry will make the competition in the nascent Chinese group buying market more intense.

According to the statistics of the Chinese Internet collective buying industry, by the end of 2010, there were 2,612 collective buying websites in China.