"Linux is an opportunity for us to make a breakthrough in developing software," Goh Zhongwen, a vice minister at the Influential Ministry of Information Industry was quoted by Reuters as saying on the ministry's Web site.
China's already large information technology market is growing rapidly at 20 per cent a year.
Software sales are expected to hit US$30.5 billion by 2005, analysts IDC reported. The major industry players are U.S.-based Microsoft, Oracle, IBM, Sybase Inc, and China-based UFSoft and Kingsoft.
However, Microsoft has said it will expand its Asia research center to get concepts to market quicker. Eighty more developers and engineers will join the Beijing-based site, but no additional infrastructure investments.
Microsoft's Asia-Pacific market, excluding Japan, makes up around 7 per cent of total revenue. Microsoft estimated that pirated goods account for about 90 per cent of the market.
Besides piracy, Microsoft is increasingly under pressure from Linux in Asia. Japan and South Korea recently reached an agreement with China to collaborate on building a computer operating system to rival Microsoft. The Japanese media reported it would most likely be based on Linux.
"We've got to keep innovating. If we can offer people something of value, then we'll stay in business, and if we can't, then we won't stay in business," said Rick Rashid, chief of Microsoft Asia Research Center in a Reuters interview.
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