He is the man who beat Google to dominate the world's fastest-growing internet market, and he has done it by building a search engine with a distinctly Chinese character.

Robin Li 's Baidu.com is a search engine that is weak on piracy and strong on censorship. It is very much in keeping with a country that mixes ultra- capitalist economics with authoritarian communist politics.

To his many domestic admirers, the multimillionaire pin-up is a model internet entrepreneur who has beaten off some of the world's most powerful multinationals. But his detractors, particularly in the global entertainment industry, accuse him of being the navigator-in-chief for an armada of online music pirates.

The 37-year-old founder and chief executive says he does not have much time either for plaudits or criticism. He is too busy trying to keep ahead of the rapid changes in the Chinese internet and building an empire that may one day, he predicts, pose a challenge to Bill Gates' Microsoft.

That may sound ambitious for a company that few people outside China have heard of, but Li has already come a long way in a very short space of time. Since he entered the business four years ago, Baidu has rapidly overtaken Google and Yahoo! as the leading Chinese search engine. It is easily China's most popular navigation site - its directory of a billion web pages is used by 90m people a day out of an online population of 100m.

International investors are so excited that when the firm listed on Nasdaq in August, it created a frenzy not seen since the height of the dotcom bubble. The value of the company quadrupled in 24 hours. Li is now reputedly worth $600m (£350m). "It was a surprise to me. I didn't expect this kind of performance," Li says. "But to me it was a branding event. It educated the market. More people now realise that Baidu is the biggest search engine in China."

Li knows the big IT players in the United States. A native of Shanxi province to the west of Beijing, in 1991 he went to the US for postgraduate study and worked for Dow Jones in New Jersey and then Infoseek in Silicon Valley. Having seen the internet at first hand on both sides of the Pacific, he says there are major cultural differences that make it difficult for a foreign firm - no matter how wealthy - to make inroads in China. The country's top three portals are all Chinese, even though Yahoo! has been trying for seven years to establish a presence. The two big online game firms, Shanda and Netease, are also Chinese. Li says the same home advantage applies to the search engine business.

"The market has exploded in a very short time," he says. "User information needs to change very quickly. Because we were local and focused we were able to catch the changes quickly. We understand the Chinese language and culture better."

Tiananmen Square

Asked to illustrate the differences, Li says his firm's search engine can distinguish between two-character and three-character Chinese names so that its results are more relevant than those of its rivals. It has also created chatrooms related to the most common inquiries so that everyone who looks for the name of a pop star gets the chance to share opinions as well as find related sites.

Critics say these are minor adjustments to a design and business model that is largely a copy of Google. The reason for Baidu's success, they argue, is that it collaborates with the communist authorities on censoring sensitive political information more than its rivals do and is less stringent in blocking access to sites that offer pirate film and music downloads. Look for the name of dissident writer Lu Xiaobo or references to the Tiananmen Square massacre on Baidu and no information appears. But search for Radiohead or Britney Spears and Baidu offers a specific MP3 channel that directs you towards pirate downloads of every song the band and singer have ever made. The record company EMI successfully sued Baidu in Beijing this week over this MP3 service - which accounts for 20% of Baidu's traffic - but Li said his company would appeal.

"You have to understand we are a search engine. We do not host any content. We just point people to information that is publicly available. So we are not infringing any copyrights." He says Baidu blocks sites that are proved to contain pirated information, but he is unwilling to comply with record companies' requests that even queries be taken out of the directory. "We list 1 billion pages, we cannot go through every one and find out if it is pirated," he says.

However, it appears to be easier for Baidu, as well as its rivals Google and Yahoo!, to block references to sensitive political information. "As a locally operated company we need to obey the Chinese law. If the law determines that certain information is illegal, we need to remove it from our index," Li says.

In this respect, Baidu is very much a mirror of modern China: passive pirated entertainment is encouraged, politically sensitive information and criticism are heavily restricted. But Li says this is as much about demographics as politics.

"One of the big differences in the Chinese internet is that the majority of users are much younger than in the US or UK. If you only count people under 30, we probably have the largest internet population in the world. If a teenager goes online it is most likely they will play some sort of game rather than look for information."

But even with the restrictions and the focus on entertainment, he says China is gradually being transformed. "People can get information - on entertainment, politics, finance - much easier than before. That will change the way people do business, the way people live."

Bubble

Li is in a powerful position, but it has not been plain sailing. True to the roller-coaster history of the dotcom market, Baidu's share price surged from the initial float price of $27 to a giddy $154 before plunging back down below $70, despite reporting a year-on-year tripling of quarterly profits, and more recently nudging upwards again.

Comparisons have been drawn with the US dotcom bubble five years ago, but Li says the big difference now is that the Chinese companies listed on Nasdaq are making profits. "It is a young industry. There are risks so it is natural that some people will lose money. It doesn't mean there is a bubble," he says. "The internet population is going up and up. I am confident that this will be a huge market."

He says Baidu is only now starting to hit its stride. "We are still in a very early stage of the game. We want to invest aggressively to make sure that we become the most dominant player in the most profitable area of the internet in China," he says. "Considering the fact that we are competing with some of the most powerful technology companies in the world, it is not an easy job."

One of the big differences between the internet in China and elsewhere, he says, is the proportion of users to the overall population. From 22m five years ago at the start of 2001 it has grown to 100m and is expected to reach 120m by the end of this year.

"Although 100m is a huge number, it is less than 10% of the population of this country, so the network effect is not fully developed yet," Li says. "There is a lot of room to grow. That is why I am more focused on long-term investment than short-term profits."

The number of businesses using the internet to advertise and sell is even smaller. Baidu's $1.1m quarterly profit was tiny compared with its giant rivals, which are pulling in revenue from the more lucrative English-language segment of the web. By one estimate, the entire Chinese search engine market was worth just $151m last year, compared with more than $4bn in the US. But speculation is reaping rewards. Li boasts that Baidu's initial investors, who paid 25 cents a share, have probably made the best return on any private investment deals ever made in Asia.

But competition is hotting up. This year Yahoo! has invested $1bn in a 40% stake in the Chinese online retailer Alibaba and Microsoft has launched a Chinese web portal through a joint venture with Shanghai Alliance Investment, the state-owned investment firm. Google has also begun recruiting high-profile senior executives from rival companies to run its business in China. Asked about rumours that it has also offered to buy Baidu, Li pauses before replying: "I cannot comment at this time."

He could certainly become a great deal richer if he sold up. But Li appears to have larger ambitions. Asked about Bill Gates' recent comment that Google is becoming more influential, Li says the Microsoft chairman should watch out for the challenge from China.

"If he is worried about Google he will probably be more worried about Baidu somewhere down the road," he says. "When the Chinese market stops growing faster than other countries in the world, we will look outside. The reason we focus here now is that this is the fastest growing market we can access."

Poetry and protest

Baidu's name - meaning hundreds of times - comes from an 800-year-old Chinese poem about the search for a "retreating beauty", the company says. "Hundreds and thousands of times, for her I searched in chaos, suddenly I turned by chance to where the lights were waning, and there she stood." Founded in 2000 and now employing 700 staff in Beijing, Shanghai and Shenzhen, it is not only China's most used search engine but the fifth most popular website in the world. It is not quite so popular with some other Chinese sites, which have formed an alliance called Fanbaidu ("anti-Baidu") to fight its ranking of search results, known as P4P: pay for performance, under which they must bid for priority placement of links.