China's ambitions to strengthen control of the Internet with filtering software became a show of the limits of its power on Wednesday, as Internet activists and businesses welcomed the abrupt delay of the controversial plan.

The surprise climbdown was reported late on Tuesday by the 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.

Officials said the software was intended to stamp out Internet pornography banned in China, and from Wednesday computer companies had originally been instructed to bundle Green Dam with any new personal computers sold in the country.

But the order was assailed by opponents of censorship, industry groups and Washington officials as rash, politically intrusive, technically ineffective and commercially unfair.

The plan might now drift into oblivion.

This was the result of combined pressure from domestic Internet users and an array of forces at home and abroad, said Wen Yunchao, an editor at the popular Chinese website Netease (www.netease.com).

Wen said the government might eventually seek to resurrect the plan and make installation mandatory.

But no matter what, for the Ministry of Industry and Information Technology to make this last-minute decision was a small victory for the forces of justice, said Wen.

In a statement on its website (www.miit.gov.cn), the ministry accepted the criticisms of computer companies. It gave no new deadline for installing the software but left open the possibility of the censorship scheme returning in some form.

And there can be no doubt the ruling Communist Party remains wary of the Internet, which now has about 300 million users across China.

U.S. PRESSURE

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

Ed Black, president of the Washington-based Computer and Communications Industry Association, said the backdown showed that the U.S. government still has some sway in Beijing.

This shows that when U.S. trade officials get involved, they get results, Black said in a statement sent by email.

Internet censorship is a widespread problem, and for too long, companies have been left on their own to negotiate with other countries. Companies don't want to be caught in the middle, he said.

Computer companies have been coy about directly criticizing the plan, and they remained so on Wednesday.

Taiwan-based Acer, the world's third-largest personal computer maker, said it would seek clarification from the Chinese government and would meet any new deadline.

We're in the business of selling computers, and if there are rules that we have to comply with when doing so in China, we'll see how best we can do that, said Acer spokesman Henry Wang.

There're differing opinions on the policy, but we're just a PC seller, and we don't make the rules.

The loudest opposition came from many Chinese Internet activists, bloggers and lawyers who threatened protests, lawsuits and other actions against the scheme.

Chen Yongmiao, a Beijing-based rights activist who has campaigned against Green Dam, said it was probably the complaints from Washington and from many industry groups that tipped the government from pressing ahead with the July 1 deadline.

China's government is too strong and confident to be scared off by Internet activists alone, said Chen.

But along with the warnings from the United States and all the chambers of commerce, especially over intellectual property, they decided the heat was too much to bear.

(Additional reporting by Yu Le in Beijing and Kelvin Soh in Taipei; Editing by Alan Wheatley and Valerie Lee)

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