Software giant Microsoft is setting up a research-and-development center in Shanghai for its online MSN service, its first such center outside the United States, sources familiar with the plan said on Wednesday.

The move came after Microsoft saw setbacks in its online services in China, including the resignation of a top executive responsible for the company's Windows Live unit in China late last year.

The center, which will cost up to $20 million, will also have a technical support team for Microsoft's online communication tool MSN Messenger, which has become part of everyday life for teenagers and young professionals in China.

"It's a clear signal that Microsoft won't give up its online MSN service in China even though it may have some problems in its local operations," said one source, who declined to be identified.

"Twenty million dollars is really small money to Bill Gates, but it's important to notice that Microsoft has chosen Shanghai for its first overseas MSN R&D center," the source added.

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