For its MSN service, Microsoft is setting up a research and development center in Shanghai - the software giant's first such international center.

Located in the Zizhu Science Park, the R&D center could cost as much as $20 million and will focus on the development of online software, Reuters reports. The center will also house a technical support team for MSN Messenger, which has become an integral part of the online lives of teenagers and young professionals in China, where MSN Messenger has over 20 million users.

An R&D facility in China would also allow Microsoft to tap into a large supply of engineering talent as well as increase it chances of becoming localized.

MSN China is also said to be partnering with Shanghai Media Group, one of the country's biggest media companies, on online video and shopping business. The R&D center may develop software to provide technical support to the partnership.