A foreigner watching video programmes on iQiyi at an expo held in Beijing. [Photo by A Jing/For China Daily]

Baidu Inc's iQiyi is targeting a US initial public offering as soon as in 2018 that could value China's most popular streaming video service at more than $8 billion, two people familiar with the matter say.

The company controlled by search giant Baidu is about to kick off negotiations with banks and deal arrangers and is shooting for a valuation of as much as $10 billion, the people said, asking not to be named because the matter is private.

Baidu wants to continue holding a controlling stake in iQiyi upon the IPO via dual-class shares, the people said. The IPO process, however, is in its early stages and the final valuation could change.

IQiyi, the only Chinese service that licenses shows from Netflix Inc, needs to build up its war chest as it battles rival platforms run by Alibaba Group Holding Ltd and Tencent Holdings Ltd.

Baidu, which is also investing heavily in artificial intelligence and autonomous vehicles, needs to buy and create more content to sustain its lead among online video platforms, based on time spent.

At $10 billion, iQiyi will be valued at a fraction of Netflix's but surpass listed Chinese rival Leshi Internet Information & Technology Corp. Its IPO would come after Baidu founder and Chairman Robin Li scrapped plans last year to buy control of iQiyi at an estimated $2.8 billion enterprise value, failing to reach an agreement on price and deal structure.

That proposed transaction drew criticism from shareholder Acacia Partners LP, which argued the price was too low and cited research at the time valuing the business at $5.8 billion. Baidu declined to comment on Tuesday.

Quality video is key to keeping users and raising advertising revenue from some 30 million-plus paying subscribers. Tencent and Alibaba have both said they're committed to spending more for content: Tencent for instance has splurged on Game of Thrones and National Basketball Association broadcasts. Meanwhile, Baidu is slashing spending on peripheral services from food delivery to travel to make room for its growing AI and content outlays.

IQiyi said in June it's in talks to share more data and revenue with partners, including Alphabet Inc's Google, to bolster its platform.

Bloomberg