A new joint venture on the horizon: US-based group-buying service Groupon announced it would extend into China and serve the largest internet market, opening the way for other prospective US companies to throw their chips into the Chinese ‘game’ pool. Groupon will team up with Tencent Collaboration Fund, China’s biggest Internet company and Yunfeng Capital, a private equity fund started by Alibaba Chairman Jack Ma.

For a country that has banned US companies like Facebook, YouTube and Twitter due to lack of censorship control, has been a challenge for web-based expansion, though this team-up is opening more doors. At the beginning, the partnership that goes under the name of Gaopeng.com, will offer clients deals on products and services in Beijing and Shanghai before expansion to other large cities.

This deal got off to a bumpy start, but relations between China and the US seem to be manifesting around e-retail services, as both countries have strong markets.  Online retail sales in China almost doubled last year to 513.1 billion yuan ($78 billion) and will probably double again in the next two years to 1 trillion yuan, Xinhua News Agency reported last month. China had almost 19 million group-buying users at the end of 2010, according to government statistics. The partnership will need to create a viable strategy in order to successfully compete with existing group-buying services in China like Lashou.com and Meituan.com.

Social coupon sites such as Groupon and LivingSocial have had a significant impact on retail shopping, and more specifically on online retail shopping. More and more customers are attracted by good offers through online shopping and it is not just big brands that benefit from this.  Groupon has rocketed into prominence largely by opening up the power of the web to small businesses like the Chicago Photography Academy that lack expertise in Internet-based marketing.

“It can quickly put them into a league they couldn’t generate on their own, says Howard Davidowitz, chairman of retail consulting firm Davidowitz & Associates. “Many of these businesses don’t have the time or capital to invest in marketing and generating traffic.”

There are also cynics saying that such customers are attracted by the prices offered by Groupon and do not become loyal to the retailer’s brand. And there is also the issue that customers will get used to discounted prices which will lead to price deflation in the future.  These are things Groupon and the industry will have to face at is looks to global scaling.