Alibaba Group launched its first self-developed mobile operating system and smartphone on Thursday in a bid to capture a slice of China's rapidly growing mobile Internet market.

The smartphone, K-Touch Cloud Smartphone, will be launched at the end of July and will use Alibaba's Aliyun operating system, the firm said in a statement. Handset manufacturer Tianyu will produce K-Touch.

"Mobile users want a more open and convenient mobile OS, one that allows them to truly enjoy all that the Internet has to offer right in the palm of their hand, and the cloud OS, with its use of cloud-based applications, will provide that," said Wang Jian, president of Alibaba Cloud Computing, a unit of Alibaba Group.

Alibaba Cloud plans to integrate the operating system with other devices including mobile phones with larger screens and tablet computers in the coming months.

The Aliyun operating system will feature cloud services such as email, Internet search and support for web-based applications. Users will not be required to download or install applications onto their mobile devices, Alibaba Cloud said.

China, the world's largest mobile phone market, has 906.8 million mobile subscribers, according to statistics provided by the three leading telcos in June.

Alibaba Group, which is 60 percent owned by Yahoo Inc , operates China's largest B2B online marketplace, Alibaba.com and China's largest online consumer shopping site, Taobao.

The firm has been busy diversifying away from its core business of e-commerce into search, logistics and now, mobile computing. Baidu , Alibaba's rival in the China Internet space, has also been diversifying away from its core business of search, into e-commerce and it has hinted that it is developing a mobile operating system as well.

Alibaba.com shares were trading 3.06 percent lower on the Hong Kong stock exchange in early afternoon trade.