Feb 2, 2005 BEIJING, Feb 2 (Reuters) - Chinese e-commerce company Alibaba is launching an online payment service it hopes will become the preferred way to buy things online in the world's second-biggest Internet market by users.

With the official rollout of Alipay, privately held Alibaba is trying to steal a march on U.S. rival eBay Inc., the online auction firm whose PayPal service dominates the online payments market.

Although China boasted nearly 100 million Internet users at the end of 2004, second only to the United States , online payment has been slow to develop in a country where cheques and credit cards are rare and cash is king.

"PayPal solved the problems for U.S. e-commerce and Alipay is the way we want to solve the Chinese e-commerce payment problem," Alibaba Chief Executive Jack Ma told Reuters in an interview.

Alipay, which is free for now, works like an escrow service. When a buyer and seller agree on a price, the buyer will transfer funds to Alipay, which releases the money to the seller when the item is delivered.

The service is supported by four big Chinese banks, including Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China and China Merchants Bank.

The system has been used on Alibaba's consumer auction site, Taobao , for several months, and the business-to-business trading operation that is the mainstay of Alibaba will adopt it from Thursday, Ma said.

Alibaba is offering Alipay to other Chinese e-commerce sites free of charge in hopes that the system, which was handling several million yuan in daily transactions for Taobao , will quickly become the de facto standard for buying and selling online in China , Ma said.

"There is no licence fee. Not now, but in the future maybe they will pay a licence fee, or maybe a transaction fee that we would revenue share," Ma said.

Alibaba, whose largest investor is Japan 's Softbank Corp. had cash revenue of $68 million last year, more than double the $30 million in 2003.

The company was "very profitable" and both revenue and profit were expected to double in 2005, Ma said.

"We are so confident with the money that we can make. The money is already in our pocket, the question is whether we want to take it out or not," Ma said.

"Alibaba does not have to prove that the Taobao model works, we don't have to prove the Alipay model works. We are just trying to prove how big the market is."

Ma said he was in no rush to take the company public.

"We are having great fun not going for an IPO. I see so many CEOs worrying about next quarter rather than next year or the year after next," Ma said.

Aske d if he planned to make any acquisitions, Ma couldn't resist taking a jab at eBay, which firmly planted a stake in China with its purchase of auction site EachNet for $180 million.

" Taobao is interested in buying eBay China . Everyone says 'Why don't you sell (your company) to eBay?' I say, why don't they sell to us?" Ma joked.