China's largest Internet company Tencent Holdings Ltd plans to cooperate with American Express Co to provide cross-border online payments, a source said on Wednesday, as the country's electronics commerce sector grows rapidly.

Under the agreement, users of Tencent's Tenpay will be able to shop on key U.S. and British websites and make online payments, the source said.

Tencent's shares were up by 1.9 percent in early trade on Wednesday, outperforming the Hang Seng Index's 0.6 percent fall.

Alibaba Group's Alipay is now the biggest online payment system in China, where there are more than 400 million Internet users -- more than the U.S. population.

As of the second quarter, Alipay now commands 45.5 percent of such third-party online payments in China, while Tenpay owns 21.2 percent market share, research data showed.

(Reporting by Huang Yuntao; Writing by Lee Chyen Yee; Editing by Chris Lewis and Jacqueline Wong)

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