Qu Weizhi, vice minister of China's Ministry of Information Industry, said the MII would make a "financial contribution" of an undisclosed amount to develop Red Flag Linux software, a Chinese variant of the freely shared operating system that competes against Microsoft's Windows system.
China will be left behind in the international software race unless it develops its own operating system, China Daily quoted Qu as saying.
He added that China's software makers were at risk of being "completely controlled" by foreign firms.
Red Flag Software Co, the company that wrote the Chinese Linux software, is controlled by Chinese President Jiang Zemin's son Jiang Mianheng.
The government recently ordered all bureaucrats to use Chinese-language Linux to run a variety of computer programs.
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