A leading Chinese online game operator has unveiled plans to challenge market leaders Baidu and Google in the country's growing internet search market. 

Netease said that it will offer a new search engine based on proprietary technology as early as next month. 

The company revealed the latest details about its search plans to analysts yesterday.

"We have a huge built-in audience for search with our online communities within our portals, email users and a growing blog community," said Netease chief executive William Ding.

The company's revenues grew almost 31 per cent in 2006 to reach $284.1m. Almost $240m of this was generated by online games.

"We are enthusiastic about our portal strategy in 2006. Our online communities on our portals, 30-plus million active email users, number one free email ranking in China, and growing blog community are all highly valuable assets," Ding added.

Netease reported a sharp increase in R&D expenses to $19.6m, as it works on its new search technology, upcoming games and other projects. The new search engine entered beta testing in December, executives said.

The company's software development team in China is generally seen as one of the most capable in the industry.

Quarterly advertising revenues increased 4.3 per cent on year to top $10m in the fourth quarter of 2006.

Analysts rank a strong advertising sales network as a prerequisite for profits in China's internet search market. Netease executives expect the search engine to be generating advertising revenues this year.