China has delayed indefinitely a much-criticized plan to force manufacturers to bundle Internet filtering software with personal computers sold in the country, in an abrupt retreat hours before the policy was due to start.

The climbdown was reported late on Tuesday by the official Xinhua news agency, which said the Ministry of Industry and Information Technology would delay the mandatory installation of the controversial 'Green Dam-Youth Escort' filtering software on new computers.

The Green Dam plan, which officials said was to stamp out Internet pornography banned in China, was to start on Wednesday, but had been assailed by critics of censorship, industry groups and Washington officials as politically intrusive, technically ineffective and commercially unfair.

No new date was given and the plan may drift into oblivion.

At a time when China's ruling Communist Party appears increasingly sure of its powers to master the economy, society and the Internet, the retreat was a vivid reminder that this sprawling government can stumble on its own ambitions.

They never expected the backlash would be so vehement, said Wang Junxiu, an Internet entrepreneur in Beijing who has objected to Green Dam and other forms of censorship.

This will just peter out now and the government will hope it will be soon forgotten, I'd say.

The Ministry accepted the criticisms of computer companies, but left open the possibility of the censorship scheme returning in some form. And there can be no doubt that the ruling Communist Party remains wary of the Internet, which now has some 300 million users across China.

Some businesses pointed out the heavy amount of work, time pressures and lack of preparation, an unnamed Ministry official said in a statement on its website (http://www.miit.gov.cn).

The official rejected claims that the plan threatened free speech, violated international trade rules or was chosen without proper tender processes.

The Ministry of Industry and Information Technology will further solicit opinions from all sides, improve the plan, upgrade methods and carry out related tasks, said the official.

But critics are likely to see the vague backdown, giving no fresh date for a launch, as a way for the government to escape quickly from the domestic and international controversy that erupted after the plan was revealed earlier this month, giving manufacturers little time to prepare.

I would say we would welcome this, said Susan Stevenson, a spokeswoman for the United States' embassy in Beijing.

DOOMED TO FAIL

Wang Junxiu, the Internet entrepreneur in Beijing, said the plan appeared to be poorly thought out and doomed to fail.

The leaders apparently decided the controversy and problems were too much and decided to make a break, said Wang.

If this had been a well-prepared plan with senior support, the result would have been very different. But it wasn't.

China said the Green Dam software was designed to block objectionable images, but the policy drew opposition from industry and human rights groups and foreign governments who said it distorted fair market competition and strengthened Beijing's ability to censor political views.

On Monday, the European Chamber of Commerce in Beijing urged China to reconsider the move, saying it poses significant questions in relation to security, privacy, system reliability, the free flow of information and user choice.

Last week, the United States also said the policy was draconian and the European Union urged it to be scrapped.

But the most potent opposition may have been the many Chinese Internet activists, bloggers and lawyers who threatened protests, lawsuits and other actions against the plan.

Susan Shirk, an expert on Chinese politics at the University of California, San Diego, said that earlier open criticism of Green Dam in the Chinese media suggested the plan did not have the backing of senior government leaders.

They do watch public opinion very carefully, Shirk said of China's Communist Party leaders. There's a very dynamic interaction between the Party authorities and the Internet public.

Ai Weiwei, a Beijing artist and blogger who has mobilized opposition to Green Dam, had planned a party on Wednesday to denounce it, said the party would go ahead.

Now we'll be celebrating a victory, he said. I expect there'll be even more drinking.

Hewlett-Packard Co, the world's No. 1 PC maker, declined to comment on the Chinese government's decision.

No. 2 vendor Dell Inc said in a statement: We respect the Chinese government's stated goal of protecting children by filtering access to pornography through the Internet. Dell said it will continue to advise customers about Web-filtering software that has been tested and the company knows works well on its PCs.

(Additional reporting by Kelvin Soh in Taipei and Gabriel Madway in San Francisco; Editing by Alex Richardson and Richard Chang)

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