HANGZHOU, China, Aug. 13 - Everything you hear about Jack Ma is improbable. But today, he looks like one of China's smartest high-tech entrepreneurs.

Yahoo's far-reaching deal with him on Thursday has turned his company, Alibaba.com, into the largest online operation in China, where Internet use is growing at an explosive pace.

At a time when Microsoft, Google and eBay are seeking to expand their operations in China, Yahoo agreed to the largest Internet investment ever made here when it bet $1.7 billion on the future of Alibaba.com and its founder, Mr. Ma.

Jack Ma is only 40, and he started out teaching English. But he is now called the "grandfather of the Internet in China," even though he claims not to know much more about computers than how to send and receive e-mail.

His admirers and detractors both call him a clever salesman and savvy marketer who knows how to attract foreign money. But few expected him to pull off a deal that now values his company at more than $4 billion. Yahoo said on Thursday that it would invest $1 billion in the privately held Alibaba.com, which operates not only its namesake, a business-to-business auction site that mostly purveys Chinese goods to a worldwide market, but also the consumer auction site Taobao.com, a strong rival here to eBay.

In exchange for a 40 percent stake in Alibaba, Yahoo also agreed to hand over control of its Yahoo China operations, valued at $700 million, putting great confidence in Mr. Ma and his management team.

Some bankers say it was a brilliant stroke by Mr. Ma, playing off eBay against Yahoo. Both had pursued Alibaba in recent months, according to bankers involved in the Yahoo deal.

And over the years, this wiry, roughly five-foot-tall man with a big, cheeky smile, has surprised doubters again and again. "He's a visionary," says Mark Su, who works in San Francisco for the venture capital firm H&Q Asia Pacific. "He's been there at the forefront of a lot of trends in the Internet."

Mr. Ma has a penchant for clever puns, gimmicky marketing and brash talk. He does not hesitate to declare that his company will crush competitors like eBay.

And his critics have fought back by suggesting that Alibaba, which had about $46 million in revenue last year, is more marketing pizazz than substance. "It's looks like vapor," says Merle Hinrichs, chairman of Global Sources, a Hong Kong-based competitor to Alibaba in the business-to-business market. "Their numbers from our perspective are exaggerated."

Regardless, Mr. Ma is now one of China's most powerful chief executives. And he did not need an initial public offering to accomplish that.

He has in turn persuaded Goldman Sachs, the Japanese investment firm Softbank and now Yahoo to finance a company he founded in his apartment in 1999, helping transform it into a diversified Web conglomerate that offers e-mail, search functions and electronic payment services along with auctions.

At Alibaba's headquarters here in Hangzhou, two hours south of Shanghai, Mr. Ma spoke in fluent English on Saturday about how he came to win over Westerners, and Yahoo.

"A lot of people don't understand Alibaba," he said. "In the U.S., B-to-B companies died because they focused on big companies. We're focusing on small and medium-sized companies. We're helping them make money."

Mr. Ma grew up in Hangzhou, learning English as a youngster by listening to the Voice of America.

He failed his college entrance exam twice before finally being admitted to Hangzhou Teachers Institute. Once there, he excelled in English, and after graduation in 1988 he stayed on to teach there for five years. But even while teaching, he had an entrepreneurial impulse. He founded a translation agency in Hangzhou and also spent a year selling medicine to everyone from barefoot doctors to large hospitals.

And his move into the online world was not just accidental; it was, by his telling, bizarre. "It's a Hollywood story why I went into the Internet," he said, laughing.

In 1995, he said, he traveled to the United States to help a Chinese company recover money owed by a joint-venture partner, an American businessman. Mr. Ma says he went to the businessman's Malibu mansion, only to discover that he had no intention of repaying his debts.

The man displayed a gun, Mr. Ma said, and then locked him in the house for two days. Mr. Ma recalls talking his way out of the situation by agreeing to become the man's Chinese partner. He promised to start an Internet company in China, even though he had no idea how the Internet worked.

"It was a terrible experience," he said. "Every time I think of L.A., I have a nightmare. And today, my luggage is still in Malibu." He has had no further contact.

From there he flew to Seattle, where he told friends about his ordeal and then asked to see this thing called the Internet. He typed the words "beer" and "China" into Yahoo's search engine, and when nothing came back, he hit upon the idea of creating Web sites for Chinese companies. His translation company's home page went up first.

When he returned home, he quit his teaching post, borrowed $2,000 and started China Pages, one of the nation's first Internet companies.

He began creating home pages for Chinese companies with the help of friends in the United States. "The day we got connected to the Web, I invited friends and TV people over to my house," and on a very slow dial-up connection, "we waited three and a half hours and got half a page," he recalled. "We drank, watched TV and played cards, waiting. But I was so proud. I proved the Internet existed."

Mr. Ma's company later formed a joint venture with a state-owned telecommunications company in a deal that he says went bad. He vowed never again to enter into a joint venture.

He then worked briefly in Beijing for the Ministry of Foreign Investment and Trade in a for-profit e-commerce venture. It was there that he made his first contact with Yahoo, when he gave a co-founder, Jerry Yang, a tour of the Great Wall in 1998, and the two became friends.

A year later, he went back to Hangzhou. By then he had honed his speaking skills, friends say, and had a following of loyal Internet enthusiasts. He also had a sense of destiny.

At a meeting with friends that he videotaped in his Hangzhou apartment in February 1999, Mr. Ma said, he formed Alibaba. "That day I talked like a crazy man," he recalled jokingly. "Then I said, 'Put your money on the table.' We had $60,000. That was our first round of financing."

Six months later, Goldman Sachs and a group of venture capital firms invested $5 million in Alibaba. Soon after, Masayoshi Son, the founder of Softbank, was at the door. "It was love at first sight," Mr. Ma said. Softbank, which initially invested $20 million, became one of its biggest backers.

In its first years, Alibaba had virtually no revenue model and often provided free services to help companies swap goods online. And it continued to find backers.

When the Internet bubble burst in 2000 and 2001, the company was forced to pare its operations. It also suffered through the SARS epidemic in 2003, with quarantined employees working on their computers from home.

But in 2003, around the same time that eBay acquired Eachnet.com, China's largest online auction house, Mr. Ma and Softbank found another way to jump-start interest in Alibaba: they created Taobao.com to go head to head with eBay in China.

Since then, the two auction houses have competed fiercely, with Taobao eating into some of eBay's customer base with its no-fee service, a money-losing effort that Alibaba hopes will eventually win enough customer support to turn into a fee-paying service.

Some competitors and critics question whether Alibaba is generating profit, but Joseph Tsai, the chief financial officer, says, "That's nonsense," calling the company "totally profitable." Alibaba's business-to-business operations generated $25 million of free cash flow last year, he said, "and this year we're going to be generating a lot more than that."

But even Mr. Ma acknowledged that Alibaba, searching for more traffic, needed a big partner.

He said he began seeing the importance that a search engine could play for auction deals. This past May, he met Mr. Yang at a conference in Pebble Beach, Calif., and the two agreed to team up on something. That talk evolved into Operation Pebble, or the Yahoo-Alibaba deal.

"The great challenge for a C.E.O. is saying no to opportunities," Mr. Ma said. "But you don't say no to Yahoo."

The deal - managed in part by Banc of America Securities and the law firm of Skadden, Arps, Slate, Meagher & Flom for Yahoo, and by Seraphin Capital and the law firm of Debevoise & Plimpton for Alibaba - was also pushed by Softbank, which has a stake in Yahoo as well as Alibaba and helped finance the start-up of Taobao.

Softbank made a huge profit on the Yahoo deal but still plowed some of that back into Alibaba, according to several bankers and lawyers, coming away with a 30 percent stake in the company.

Analysts are already questioning the deal. "The challenge which Alibaba now faces is whether it can manage a good business in so many different sectors," said Lu Benfu, an Internet analyst at the Chinese Academy of Social Sciences.

Mr. Ma's answer is that he has the focus and the foresight to make things happen. He indicated that earlier this year, when he saw competition brewing between Yahoo and eBay, with eBay promising to invest hundreds of millions in China in coming years, he saw an opportunity to strike a deal and shift the game.

Now, posing for photographs in his office, Mr. Ma is standing before the smiling Alibaba logo he designed. And his grin is wide.

"Thank you, eBay," he joked. But he is not altogether kidding when he adds, "You made all of this possible."