Eyeing a population tipped to become the world’s largest nation of internet users within a few years, California-based Cisco Systems has unveiled a massive $16 billion “next chapter” investment plan for China.

The sprawling US maker of internet infrastructure equipment will invest the additional funds between now and 2012, sinking major capital into manufacturing facilities and dramatically increasing the company’s overall financial commitment to China.

Cisco’s ambitions in China centre on the booming order books of local telecoms operators, who are expected to splash around $20 billion on building wireless networks over coming months.

Manufacturing output will be doubled and the company has also said it will sink a possible $100 million into a venture capital partnership with the China Development Bank, investing in new growth businesses.

Already a substantial player in training young Chinese to use network technologies, Cisco plans to establish 300 new educational centres within colleges and universities.

Cisco’s chief executive, John Chambers, said: “We are seeing more and more innovation coming from emerging markets. This $16 billion (£7.7 billion) commitment is just the beginning of the next chapter for us in China.”

Mr Chambers also announced a business partnership with Alibaba – the online marketplace and e-commerce giant whose forthcoming listing on the Hong Kong Stock Exchange has already electrified investors. Cisco paid $17.5 million for a stake in Alibaba.com.

So-called “grey market” trading in Alibaba still officially untradeable stock has seen the company’s nominal value soar 93 per cent within the past few days. The initial public offering attracted record subscriptions, giving the company a market value of $1.5 billion and making it the world’s largest internet flotation since Google when the shares go live on the exchange next week.

The deal agreed yesterday could see Cisco working with Alibaba to provide business services for small and medium-sized companies – the same companies who likely already trade through the Alibaba platform. For the Chinese web company, the partnership opens a possible avenue for expansion into the US and beyond – a move its founder, Jack Ma, has already said he is eager to make.

“We feel Cisco without a doubt is our most important partner for growth,” said Mr Ma at a press conference. “We are looking at a long-term partnership - five years, 10 years or even longer.”

Cisco has run a business in China for more than 13 years, and invested around $8.5 billion since 2002. Like other internet-related companies operating in the Communist state, however, Cisco has come under fire for its dealings with a government that regularly censors news websites and other supposedly subversive material available over the internet.

“One thing tech companies cannot do, in my opinion, is involve themselves in politics in a country,” said Mr Chambers.

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