Chinese e-commerce giant Alibaba rumored to be working on its own game console for China

Rumors say that Chinese e-commerce giant Alibaba is designing a high-end game console to compete with Microsoft’s Xbox One and Sony’s PlayStation 4 in China, according to market researcher Niko Partners, which follows the Chinese game market closely.

Alibaba declined comment. Lisa Cosmas Hanson, the managing director at Niko Partners, said in an email that she heard from a credible source that Alibaba may release the machine early next year. But she has not been able to independently confirm the rumor. A spokesperson for Alibaba said it does not comment on market rumors or speculation. If true, the move could shake up the video game business in China, where consoles were banned for 15 years by the government.

We haven’t been able to verify the rumor as fact, but we think it carries enough gravity to report it. You can use your own judgment about its veracity, and we’ll keep trying to dig out the facts on it. We don’t report most rumors, but Niko Partners is a good source of information.

China lifted the ban earlier this year, and Microsoft launched the Xbox One console in September, and Sony said today it would launch the PS4 in China on Jan. 11. Alibaba is also a global company, and if it succeeds in China, who knows what it could do with a game console in the rest of the world. Two other sources, including the CEO of a Chinese game company, confirmed that they had independently heard the same rumor as Cosmas Hanson.

But launching consoles is hard work. Alibaba could quicken its path to market by using the Android operating system from Google, but it would face many rivals on that front in China. Alibaba would also have to get a lot of support from game developers and publishers. Sony plans to launch with 70 partners, and Microsoft also has support from a lot of game makers.

Cosmas Hanson said she does not believe that Alibaba will use Android or Linux and instead will go for the high-end.

“They have been talking to developers about potentially getting content, some of if domestically developed to avoid the headaches of foreign game content rules yet there are of course domestic content rules too,” Cosmas Hanson said.

Alibaba is one of the few companies that could make a credible maneuver into console games. Alibaba had a massive initial public offering this year, raising $25 billion in cash on the strength of its e-commerce business. It is one of the few tech companies that could make Microsoft and Sony look small.

The Chinese government encourages companies to make their systems in China or to tap local game makers as partners.

Alibaba has become active in the game market lately, as it has made a lot of moves to counter rival Tencent, the Chinese social giant which is the largest game company in the world. Alibaba invested in a social mobile gaming platform called KTplay, and it put $120 million into Kabam. It was also the lead investor in a big round of funding for Tango, which has mobile messaging service that is targeting game players. It also agreed to take the Ubitus cloud-gaming service into China, and it is taking Rovio’s Angry Birds: Stella into China. Most of those investments, however, are focused on mobile games or Android games for TVs.