Local media are reporting a rumor that software giant Microsoft (MSFT) will set up its first overseas MSN online services research and development center in Shanghai.

According to the report, Microsoft's new MSN R&D center will be located in Shanghai Zizhu Science and Technology Park, involving a total of US$20 million in investment. It will be used to develop software and offer technical support for MSN Messenger.

Microsoft's MSN Messenger currently has more than 20 million users in China. Globally, it is seeing increased competition from VoIP competitor Skype and also from Yahoo. In China, it has services like Tencent's QQ to also contend with.

Microsoft has not confirmed the news.