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Steve Ballmer, chief executive officer of the US software giant Microsoft, has started a new campaign to strengthen partnership with governments and businesses on the mainland in the face of increasing challenges from the industry.

China's Ministry of Education (MOE) and Microsoft signed a co-operative framework on Thursday under which the US business will contribute US$10 million in five years through investment, donation and other forms to promote the adoption of information technology by students from kindergartens to junior high schools.

"Over a year ago, I visited China, one of many many visits that I paid. As I said at that time, Microsoft is totally committed to supporting China, and supporting the development of its software economy, and also continuing the advancement of partners, particularly in the area of education," he said.

Ballmer also previewed Microsoft Windows XP Media Centre 2004 Chinese Edition in Beijing for leading Chinese personal computer makers including Legend Group, the biggest PC maker in Asia Pacific.

The new operating system, with better integration of other consumer electronics functions like TV sets and stereos, will be formally released in the world's second-largest PC market around the New Year.

On Thursday evening, the US software firm also signed a memorandum of understanding with China National Computer Software & Technology Service Corp (CS&S) to develop technology solutions and local software expertise that will strengthen China's software economy - both domestically and for exports.

Microsoft has been trying to improve ties with Chinese governments and businesses to improve its image as "a monopoly running a extremely lucrative business" and address their security concerns.

"To tell the truth, it took me some time to change my attitude towards co-operation with Microsoft," said Fan Boyuan, vice-mayor of Beijing Municipality, "However, I have changed. Microsoft, indeed, has excellent technology and software."

Even as it tries to win the hearts of Chinese officials and businesses, Microsoft is also facing mounting challenges in the world's most-populous market.

According to US-based market researcher Gartner Inc, the increasing adoption of Linux, an open source operating system, was one of the major reasons for the 8 per cent quarter-on-quarter growth in the computer market on the mainland in the third quarter.

At the same time, Microsoft's arch-rival Sun Microsystems decided to donate unlimited copies of its office automation software Star Suite 7.0 to Chinese students, its executive vice-president Crawford Beveridge said on Thursday in Beijing.

The software, sold at US$25 per licence, will first be given to schools and universities selected by MOE.

"Office software is not a very big business for us, so our real intention is to let Chinese students enjoy cheap but excellent software," said a Sun Microsystems China executive.

On Monday, Sun Micro said in Las Vegas that the Chinese Government would install over 200 million copies of its Java Desktop System, an operating system that competes with Microsoft Windows.

"If there are two products with the same feel and look for sale together, you can imagine what choice customers will make," said the Sun Mirco China executive.

A Sun Java Desktop System is priced at US$100, about a third the price of Microsoft Windows XP.

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