IBM said Friday it has reached an agreement with China’s Tencent Holdings Ltd. to provide cloud computing services to businesses in the People’s Republic. The deal helps Big Blue expand its footprint in China, a crucial growth market, while giving Tencent a strong partner as it battles rival Alibaba in the country’s cloud market.

Under the deal, IBM and Tencent Cloud will offer hosted computing services for small and midsize business in several industries, including health care and municipal operations. “The industry dimension makes this especially appealing for businesses,” said Nancy Thomas, managing partner for IBM’s Business Consulting Services unit in China.

“IBM and Tencent’s vision is not only to bring the scale and cost benefits of cloud computing to enterprises in China, but to add differentiating value by serving the particular needs of specific industries. That is the key to unlocking the transformative power of cloud computing,” said Thomas, in a statement.

Organizations are expected to spend $140.6 billion on IT products and services in China in 2014, according to Gartner. Partnering with Tencent gives IBM a leg up on other U.S. tech vendors looking to play in the market. “Current regulations favor Chinese players, which makes it difficult for international cloud players to offer services in China,” Gartner said in a recent research report.

Microsoft recently paired up with 21Vianet Group to offer its Azure cloud services in China.

For Tencent, partnering with IBM gives it access to Big Blue’s tools and services for running and integrating applications in the cloud, as well as industry experts. “Tencent has a stable and reliable cloud computing platform, while IBM has abundant industry expertise aimed at the enterprise,” said Tencent Executive Vice President Taosang Tong, in a statement.

That will help it as it battles Alibaba Group, which launched its cloud computing unit in 2009. In a twist, Alibaba may eventually bring its cloud services to North America, where it would compete with Amazon Web Services, as well as Microsoft and IBM’s cloud businesses. Alibaba’s revenue from cloud services topped $100 million last year, according to company documents with the Securities and Exchange Commission in connection with its Initial Public Offering earlier this year.

IBM and Tencent plan to offer a number of applications through the cloud in China, including software for customer care, digital marketing and asset management.