US software giant Microsoft is planning to pour US$3.7 billion into China over the next five years, it announced yesterday.

Under a deal signed with China's top economic planning body, the National Development and Reform Commission (NDRC), Microsoft has vowed to increase its investment and commitment which it says will aid the development of the Chinese software sector.

"It is a win-win deal", said Zhang Ying, a senior IT industry analyst with Analysys International, a leading IT analysis house in China.

"Microsoft gets government support to improve the software development climate and the government gets much-needed assistance from Microsoft to develop the software sector."

Microsoft will place a US$700 million hardware export order with Chinese companies in each of the next five years, according to a Memorandum of Understanding (MOU) signed with the NDRC.

According to the MOU, the US firm will also invest US$100 million during the same period to collaborate with Chinese software firms or their offshore subsidiaries. This will be done in the form of setting up joint ventures or co-operation, a move the software company says is designed to help the growth of Chinese software firms.

In addition, Microsoft will, in the same timeframe, place a US$100 million order with Chinese software companies for software technical support, development and testing services.

The software giant is also planning to train 10,000 software professionals for China in the next five years.

It will also set up an "NDRC-Microsoft Software Innovation Centre", in a bid to help China sharpen its software industry's competitive edge.

Similar centers, according to the MOU, will also be set up in other municipalities.

The MOU, signed on April 18, is the second of its kind the software giant has signed with the Chinese Government.

The first such MOU was in 2002 with the then State Planning Commission, the NDRC's predecessor, under which the software firm committed itself to investing 6.2 billion yuan (US$775million) in various co-operative projects.

Microsoft has recently inked a series of deals with some leading domestic PC makers to buy its Windows operating system.

Lenovo, China's top PC maker, has agreed to pre-install Microsoft software on its PCs which will be sold in more than 65 countries and regions around the world.

The Lenovo deal, the single biggest contract Microsoft has secured since its entry into the Chinese market, is expected to generate about US$1.2 billion for the US firm over the next 12 months.

In similar deals with other Chinese PC makers such as Founder, TCL, Tsinghua Tongfang, the Redmond, Washington-based software giant is also expected to harvest about US$430 million.

The Ministry of Information Industry, the National Copyright Administration and the Ministry of Commerce jointly issued a circular in March, requiring domestically-made computers to be pre-installed with legitimate not pirated software before they are distributed.

"Much of the market, at least in the operating system segment, will go to Microsoft when the policy is carried out," said an analyst, who requested anonymity.

"It's a huge boost for Microsoft," said the analyst, although maintaining there was no direct relation between Microsoft lobbying and the government's authentic software pre-installation decision.

(China Daily April 27, 2006)