It’s being fully covered here, but Yahoo buys $1 billion of Alibaba shares, gets 40 percent of the company and turns its China operations over to Alibaba. (The news release is here.) In an interview with us tonight, Jerry Yang likens the arrangeent to Yahoo Japan, where Yahoo is a minority owner, but licenses it technology and brand.

“Alibaba will be the company that grows and hopefully cultivates the Yahoo brand in China,” Yang said. “The combination really gives Alibaba the breadth and depth of leading assets that is really unrivaled in China. They will be the only company in China to have leading search and auction assets.”

Said Yahoo Chief Executive Terry Semel:

“It’s one company that combines all the assets of both companies, giving the company the opportunity to be really, really strong in each of the three or four most important areas of the Internet, from search to commerce to communications.”

Yahoo said the deal was expected to close in the fourth quarter of 2005 and is valued at $4 billion.

Update: Here’s our story (free registration required) in Thursday’s Merc.

PS. Meanwhile, Google is making its own progress in China, endorsing China Enterprise, China Source and Hotsales as “authorized resellers” that will provide sales and support for Google AdWords ads in China.