China's latest Internet controls have been assailed by rights advocates and Washington, and yet the real challenge to its Green Dam plan may be the nation's own computer market, an anarchic digital bazaar.

Starting from Wednesday, the government has ordered that personal computers sold in China must leave manufacturers with Green Dam filter software intended to block obscene images and, critics say, deter political dissent.

Such schemes sound easy enough for a one-party state, and this is just the latest Communist Party initiative to control the Internet, which has about 300 million users in China, according to the China Internet Network Information Center.

But a walk through Zhongguancun district in northwest Beijing, hub of the nation's digital market, and the hurdles to such controls seem as numerous as the shops and hawkers selling computers, software and pornography.

For all the domestic and international uproar about Green Dam, many retailers here who will be selling computers packaged with it were either oblivious or dismissive.

What's Green Dam?, said Wu Baobao, a woman in her 20s who was selling Dell laptops in the raucous Hailong electronics mall.

When you buy a computer after July 1 it will come with the software, she added after asking a colleague in a neighbouring stall. But don't worry ... we can take it out easily.

Multi-nationals have for years fretted about the inability of the Chinese government to stamp out pirate software sold for a fraction of the cost of legitimate copies.

Now that unruly market may also frustrate censors and ensure Green Dam ends up more often junked or ignored than used.

The Green Dam plan is a serious violation of market rules. Governments shouldn't impose a particular brand of software, said Mao Shoulong, professor of public policy at Renmin University, just down the road from Zhongguancun.

But in practice the impact will be limited, said Mao. It's optional software, and you can't easily control such a fragmented retail sector. Big companies will follow orders, but who can just order around thousands of small ones?

CHINA'S SILICON VALLEY

Zhongguancun in Beijing's university district promotes itself as China's Silicon Valley. Microsoft, Google and plenty of other digital giants have research labs or big offices there.

But the digital retail sector that has sprung up since the 1980s resembles more of a vast, multi-storey bazaar, with big-name retailers jammed up against stalls and furtive hawkers.

Until the financial crisis hit, business was booming. In 2008, Zhongguancun recorded 60 billion yuan ($8.8 billion) in sales of digital products. That was 4.5 percent more than in 2007, ending a long run of double-digit growth, according to the Zhongguancun Electronic Trade Chamber of Commerce.

The district has 3,147 registered electronics retailers who last year sold 2.4 million personal computers, the Chamber told Reuters. But there may be even more uncounted stalls.

The district has attempted to clean up, and pirate software is not as openly sold as a few years ago. But it is certainly still there, as is the pornography Beijing wants to block.

On street curbs, dozens of people, mostly ragged women clutching babies or small children, approach passersby urgently whispering that they can sell pornographic DVD discs. The babies are meant to deter police from carrying out body searches.

A brisk walk with one of the women through a warren of dirt-floor alleys and run-down brick huts soon brings the prospective customer to stashes of luridly titled videos.

Yang Fuying, a gangly salesman in the Beijing Silicon Valley Computer City, said business was too tough to spare much thought about the government's Green Dam plans.

Mid-year is always a low season, and the financial crisis has made things worse, said Yang. We'll have to tell customers about the software, but I don't think it will have much impact. You can either tear it out or dump the disc. So what?

(Additional reporting by Yu Le; Editing by Ken Wills and Jeremy Laurence)

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