Microsoft and Chinese officials on Thursday denied thereport, which appearedin Wednesday's edition of the Yangcheng Evening News.

But a Ministry of Information Industry official, whodeclined to beidentified, said the government was advocating that users bought domesticsoftware.

The newspaper offered no evidence to back up its report that Windows 2000had been blacklisted in China even before its formal launch in March.Microsoft is reeling from a stream of negative publicity in China, fuelledby a vitriolic book written by its former Chinese general manager, WuShihong, who accuses her former employer of arrogance and insensitivity toChina's needs.

A piracy lawsuit by Microsoft against a small local firm unleashed anationalist backlash against the U.S. Software giant. The suit was thrownout by a Chinese judge last month.

Microsoft now faces a daunting challenge trying to reverse perceptions amongsome Chinese that it is a monopolistic bully and symbol of U.S. Economicimperialism.

NATIONAL PRIDE IN HALTING MICROSOFT
"The country's important government ministries will not permit the use ofMicrosoft Windows 2000 on their computers," the Yangcheng Evening Newsquoted unnamed officials as saying.

Instead, ministries would use "Red Flag-Linux", a new software platformdeveloped by Chinese researchers and based on upstart operating system Linux.Creating an indigenous operating software platform would be theinformation-age equivalent of China inventing the atomic bomb and launchingits first missile and satellite, it said.

"Maintaining independence and keeping the initiative over our own operatingsystem will be the 'Two Bombs and Satellite' of the new era," the newspaperquoted the officials as saying.

The government, whose desktop computers are now dominated by Microsoftoperating systems, would also save billions of dollars in potential softwarepurchases, it said.

A Microsoft spokeswoman in Beijing said: "We don'T think there's anyconcrete evidence that shows the government would take a negative attitudetoward our products."

"We have very good relations with many Chinese government departments andthey are a major customer," she said.

The official with the Ministry of Information Industry said a ban onMicrosoft was not very likely in the near term.

"But the government is advocating that users buy domestic software," headded.The state-run think tank developing Red Flag-Linux said government officeshad expressed strong interest in scrapping Windows for Red Flag, citingsecurity concerns as a Chief reason.Sun Yufang, a vice director of softwareresearch at the Chinese Academy of Sciences, said that Windows 98 andWindows 2000 contained a secret "back door" which gave Microsoft access tousers' computer files when they logged onto the Internet.

Red Flag, which is being adapted for use on personal computers and isscheduled to hit store shelves mid-year, would protect the government fromattacks by foreign hackers, Sun said.

The Microsoft spokeswoman said it was impossible for Microsoft to trackWindows users on the Internet or access their computers. "That's totallywrong," she said.