Following Microsoft's bid for Yahoo isn't all that different from keeping up with your favorite soap opera. There have been public chidings, reports of secret meetings and a constant stream of alternative suitors, proving that digital business maneuvering could give politics a run for its money in the strange bedfellows department. And now, just when the press is reporting that the silence that has overcome Microhoo could indicate an imminent deal, a surprise character named China has come out of the woodwork.

According to an article in The New York Times, China could be a serious factor in determining whether or not Microsoft is able to get its hands on Yahoo.

Microsoft, no stranger to doing business under the watchful eyes of U.S. and EU regulators, certainly had to expect tough scrutiny over its attempt to buy Yahoo. But approval from both sides of the Atlantic is par for the course in the M&A world. What's changed with this potential deal is a new Chinese law set to take effect in August. The law gives China jurisdiction over any merger "that involve[s] acquisitions of Chinese companies or foreign businesses investing in Chinese companies' operations."

Here's the problem: Yahoo owns a stake in Alibaba, which in turn runs Taobao, Alipay and Yahoo China.

While August may seem like a long way away, it's just around the corner when you factor in regulatory time. Google waited nearly a year for U.S. and EU regulators to bless its DoubleClick acquisition, and there's no indication that Microsoft's bid for Yahoo would happen any sooner. So, pushing the deal through quickly isn't likely to be of much help.

The alternative is for Yahoo to dump its $3 billion stake in Alibaba. But as TechCrunch points out, such a move could be a huge mistake given the importance of the emerging China market.    

Compounding matters is the fact that Chinese regulators don't have much of a track record with international mergers and acquisitions, so it won't be easy to determine how they are likely to react to the deal.

Does anyone think China may step in and save Jerry Yang and Yahoo? Feel free to comment.