Almost two years after promising an online service that would have "a profound impact on the China internet industry", AOL Time Warner and Chinese computer manufacturer Legend have put their joint $200m (£148m) joint venture on hold.

The two companies cited increased competition in the Chinese internet market as the reason for putting the service, known as Flying Dragon, under review.

Legend and AOL Time Warner announced the venture in June 2001, but never rolled out a commercial service. A trial version, which was started in August, ended earlier this year.

Mary Ma, Legend's chief financial officer, told Reuters that, since the two companies had announced the venture, China's largest fixed-line phone companies, China Netcom and China Telecom, had launched internet access services.

"The industry has changed in China. We have to think about a new partnership, otherwise it will be tough," Ms Ma told Reuters.

The venture had been launched, amid much fanfare, in Beijing, where the then chief executive of AOL Time Warner, Gerald Levin, described it as "a major step towards fulfilling the promise of the internet around the world".

It was 51% owned by Legend, and each company committed $100m over time. It is still possible that the plan will go ahead, possibly with new partners brought in.