Microsoft has won approval from Beijing to sell its Windows 2000 software in China, laying to rest fears that new rules on encryption technology would snarl the product launch later this month.

"It's full steam ahead," said Michael Rawding, Microsoft regional director for greater China said on Wednesday.

"All versions are approved by the Ministry of Information Industry and the State Encryption Management Commission for sale in China," Rawding told Reuters in an interview.

China began enforcing rules in January that require companies and individuals to register their encryption products with the government, then apply for permission to use them.

Many executives fear the rules are the first step toward an outright ban of the sale in China of foreign encryption technology, which is embedded in everything from software and mobile phones to cable television systems and Internet servers.

Microsoft's Windows 2000 operating system contains powerful 128-bit encryption technology, and many companies have been waiting to see how China handled the case before proceeding to register their own encryption goods.

Flexibility in the rules

By approving Windows 2000, scheduled for launch in China on March 20, the State Encryption Management Commission appears capable of enforcing the rules flexibly, Rawding said.

"We were in discussions with them constantly. We wanted an explicit pledge that they would not take punitive action against those products, because their release was imminent."

Some analysts had feared the US software giant would be forced to remove its encryption feature from Windows and replace it with Chinese encryption technology.

But Rawding said Microsoft would be able to market the operating system without making any changes. "It's not feasible to assume you can rip out an encryption technology and replace it with another one," he said.

The rules appear to be aimed at giving Chinese authorities the ability to monitor encrypted communications when matters of national security or law enforcement are concerned.

Similar --- and often stricter --- rules exist in many Western countries, analysts said.

The encryption technology embedded in Windows 2000 is not a specific tool, but rather a feature designed to support applications such as electronic commerce, Rawding said.

"It shouldn't conflict with their security goals," he said. "Over time, for certain applications like e-commerce, it will be widely used."

Anticipating strong market

Windows 2000 is an operating system aimed at business users, and is designed to replace the Windows 98 and Windows NT software common in Chinese business desktops and servers.

The desktop version --- Windows 2000 Professional --- will retail for about 1,999 yuan (US$240), and the standard version for servers will be priced at about 10,700 yuan, the company said.

Rawding said he expected no impact from a Chinese newspaper report in January which alleged government offices were banned from using Windows 2000 because of fears of shortcomings in its security features, opening the way for hackers.

Beijing quickly denied the report and Rawding said the government would be a major customer for the new product.

"We have no concerns and we anticipate a very strong market reaction," he said.

"Key ministries and key enterprises are actively evaluating Windows 2000," he said. "The pre-order figures are very exciting."

Microsoft dominates the Chinese market, installed in about 60 percent in China-based Web servers, the company said. The rest of the market is divided between several competitors, such as Linux and Netscape.

(People's Daily October 16, 2003)