Xiaomi Corp, a rising star of the smartphone industry in China, announced a 1.8 billion yuan ($290 million) investment in online video website iQiyi.com, a subsidiary of local Web search giant Baidu Inc, on Wednesday.

Shunwei Capital, an investment firm set up by Xiaomi founder Lei Jun, will be an investment partner of the Beijing-based handset maker. Baidu has also increased its investment in the website with an undisclosed amount.

Gong Yu, chief executive of iQiyi.com, said the site will help Xiaomi to "greatly enlarge" video resources, which Xiaomi will deliver to its hardware users free of charge. Most of the investment will be used to produce self-made video contents, according to Gong.

He said the companies will have deeper cooperation in mobile end, where the company is on track to become the country's largest smartphone vendor in this quarter.

The companies did not disclose how much stake Xiaomi got by investing in iQiyi.com.

Lei Jun, founder and CEO of Xiaomi, pledged to invest $1 billion in the company's video content development business a month ago.

The Beijing-based company hired Chen Tong, the founder of China's largest micro-blogging network Sina Weibo by user numbers, earlier this month to oversee the cultural and media businesses.

"We will mainly invest in video makers in the future," Chen told China Daily on how will he spend the rest $600 million budget.

"There are some potential investment plans going on but we are not ready to disclose them," said Chen.

Statistics from industry consultancy iResearch Inc showed turnovers of Chinese online video market neared 7 billion yuan in the third quarter, a jump of more than 83 percent year-on-year.

Advertising remains the major revenue driver for local video sites as more than 60 percent of the industry's total revenue contributed by advertisements.

Xu Hao, an analyst from iResearch, said with the penetration rate of Internet TVs surging in the country, online advertising will play a bigger role in driving revenue.

"Mobile video is a major investment platform for Chinese advertisers," Xu said.

As of July, nearly 290 million Chinese are using mobile devices such as smartphones and tablets to watch videos, while the amount was about 140 million in July, 2014, according to Xu.