Netease, one of China's leading internet portals and online game operators, expects to end its partnership with Google this year, executives have said. 

Under the current agreement between the two firms, Netease promotes Google as the main search engine for its users.

The announcement had been widely expected, as Netease has made no secret of the fact that it is developing its own search engine that will compete with Google and China's search market leader, Baidu.

"When our own search engine is released, we will terminate the contract or the current partnership with Google," Netease chief executive William Ding told analysts during a conference call this week.

Michael Tong, co-chief operating officer at Netease, added: "Our development of the in-house search engine has been progressing well and we are planning to officially launch it during the second half of 2007 with a major marketing campaign."

Netease announced an increase in revenues to $71.8m for the first three months of 2007, up from $69.2m in the fourth quarter of last year.

Like many competitors the company was hit by a downturn in the mobile services market, following a change in government regulations. However, games revenues, the company's mainstay, grew almost seven per cent to $62.4m.

Netease's most popular game, Fantasy Westward Journey (FWJ), hit a new record of more than 1.5 million concurrent users during the quarter.

"FWJ's record peak concurrent users during the first quarter, driven in part by major weekend events and the Chinese Valentine's Day holiday, is a strong indicator of the popularity and long lifecycle of this game," said Ding.

"We continue to have positive expectations for FWJ and plan to release an expansion pack in the second half of the year to capitalise on this game's momentum. 

"We are confident in our ability to migrate the existing players to the upgraded version and will launch our marketing campaign concurrent with the internal closed beta."

Another eagerly awaited upcoming massively multiplayer online game, Tianxia II, has been delayed due to play balancing issues, executives said.