This week, Microsoft extended its reach in China by getting the country's top PC makers to agree to bundle Windows XP on their PCs and to promote antipiracy measures. Also, Microsoft released Pocket PC 2002 in China, which is the third largest software market in the world and the fastest-growing market for Microsoft software.

The antipiracy pledge is particularly important because more than 90 percent of software bundled with new PCs in China is pirated. But Microsoft hopes to recoup lost revenues with an agreement from the country's top four PC makers to end this practice and preinstall XP on all their new PCs. The companies--Great Wall, Legend Holdings, TCL Computer Technology, and Tsinghua Tongfang--represent about 60 percent of the PCs sold in China.

"They never made this kind of commitment before," said Microsoft China spokesperson Sharon Zhang. The agreement could be risky for the companies because it will raise the price of their PCs by 10 percent. The Chinese aren't used to paying a premium for software; they can purchase software inexpensively on the open pirate markets in that country. XP, for example, retails for about $180 in China, but consumers can find pirated versions of the software for only $1 to $3 on the street.

In related news, Microsoft also released a Chinese version of its Pocket PC 2002 software, which powers handheld devices. Companies such as Acer, Asustek, and Compal Electronics will sell devices with the new software in the coming months.