Alibaba's cooperation with Apple may start with offering Apple Pay in the Chinese market through an intermediary to skirt regulatory hurdles, Alibaba Vice Chairman Joseph Tsai told a Chinese-language news wire.

Alibaba is working out details on how Apple Pay can operate in China given the regulatory restrictions that limit Apple's ability to offer payments in China, according to a Yahoo News report that cites a story on Tencent's Similar restrictions have also kept PayPal from offering its services in China.

One potential way to offer Apple Pay in China would be for an Alibaba electronic payment affiliate in China's Zhejiang province to provide back-end services for the Apple Pay system, Tsai told Tencent (the Yahoo report did not identify that affiliate). By using a local partner, iPhone users in China could use Apple Pay to pay bills from Alipay accounts. Alipay is an Alibaba affiliate with a PayPal-like service.

Apple CEO Tim Cook has also expressed an interested in working with Alibaba, though Cook's public comments were not limited to Apple Pay and were also seen as an attempt by Apple to increase iPhone sales in China. Apple Pay launched in the U.S. in October, and an international move is widely expected.

Alibaba is also courting PayPal as it seeks to build an e-commerce business in the West.

While Alibaba is a large company—Alipay alone has 18 million users—it faces an uphill battle to expand in other markets because of the entrenchment of existing companies such as Apple and PayPal. EBay's in the midst of spinning off PayPal, leading to speculation that Alibaba may buy PayPal to extend Alipay's reach globally.

Alibaba and Apple did not return requests for comment by deadline.

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