The Chinese government has required that personal computer makers bundle software that filters Internet content from July 1, raising concerns over cyber-security as well as Internet freedoms.

The free Green Dam-Youth Escort software, developed by Jinhui Computer System Engineering Co, can effectively filter unhealthy words and images, according to a Ministry of Industry and Information Technology document seen by Reuters.

Foreign computer makers are now caught between maintaining access to their fastest-growing major market, and concerns the mandatory software will make their products vulnerable to security breaches as well as potential malfunctions.

The requirement to pre-install the software is in order to consolidate the achievements of the online campaign against pornography, combine punishment and prevention, protect the healthy growth of young people, and promote the Internet's healthy and orderly development, the ministry said.

Many aspects of the software are still unknown, but computer industry sources worry it could open a channel for industrial espionage as well as blocking content Beijing dislikes.

China already has a system to block websites deemed objectionable. Internet police monitor sites, blogs and other online venues for pornographic or politically sensitive content.

Summer vacation is coming up, and many Chinese parents worry about what their children will see on the Internet. That's the purpose of the software, Jinhui founder Bryan Zhang said.

Even if you wanted to use it for, say, political content, you couldn't, because it's image distinction software that tracks pornographic images, Zhang told Reuters.

PC makers must report to the ministry the number of computer units sold and software packages installed on a monthly basis in 2009, and yearly starting in February 2010, the circular says.

Using the software is not compulsory. You can shut it down or take it out if you want to. With a password, you can turn it off at any time, Zhang said.

It's an optional tool to prevent access to pornography, just like anti-pornography software in the United States.

An industry official, who did not want to be identified for fear of retaliation against his company, said foreign technicians testing the software had been unable to uninstall it.

The Wall Street Journal first reported the news on Monday.

CONCERN

China is one of the world's fastest-growing PC markets, with research firm Gartner forecasting total PC shipments will climb by about 3 percent this year to more than 42 million units.

The Chinese market is dominated by homegrown brands such as Lenovo and Founder, although global brands such as HP, Dell and Acer also have a significant market share.

Acer said it was not aware of the new requirement, while rival Taiwanese maker Asustek said it was but had not yet been officially informed by the Chinese government.

Along with the rest of the industry ... we are studying it and working with relevant government and other parties to seek clarifications, said Dell spokeswoman Faith Brewitt.

Jinhui last year won a tender to supply filtering software to the ministry, according to government procurement information.

Since then, the ministry has subsidized the company to make the software available for free downloads, said Zhang. It previously sold for 368 yuan ($54) a package.

The software will remain free for a year, and after that consumers will have to pay to continue using it, Zhang said.

It has already been bundled in over 50 million locally made PCs offered rural dwellers as part of China's economic stimulus package, according to a promotional website (www.lssw365.net).

It said the software is being used by 2,279 schools across China and had been downloaded 3.27 million times by end-March.

The U.S. embassy in Beijing said it was concerned.

We would view any attempt to restrict the free flow of information with great concern and as incompatible with China's aspirations to build a modern, information-based economy and society, an embassy spokesman said.

Compliance could leave computer manufacturers open to charges they abetted censorship and violation of privacy.

The software has a black list of sites with pornographic or violent content it blocks, said a customer service representative affiliated with a website offering the software for downloading.

The software also has a white list of permitted websites. Users can add or delete websites from the white list. While the white list is publicized, the black list is not.

Savvy Internet users in China currently stay one step ahead of censors by using virtual private networks or proxy servers to access sites outside China, and spread information domestically by quickly reposting expunged content or using oblique language.

Pornography is easily accessed on the Chinese Internet.

(Additional reporting by Chris Buckley and Beijing newsroom; Editing by Jerry Norton)

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