All government departments at, and above, county level will use licensed software by the end of 2013 in the latest move to protect intellectual property rights (IPR).

Industry insiders predicted that the move will create a wave of business opportunities for software providers, especially for foreign brands.

A source from the Ministry of Commerce said all government departments in 600 cities and 2,900 counties will use licensed software by the end of 2013, while the 31 provincial-level governments will promote the use of licensed software by the end of next June.

The move came after 135 central government departments, including all ministries, completed installing licensed software at a cost of more than 140 million yuan ($22 million) in May.

This is a demonstration of the government's strong commitment to protecting IPR and improving the business environment amid criticism over the use of pirated and fake goods, experts said.

The agreement to have licensed software installed in all local government departments was struck at a meeting of the China-US Joint Commission of Commerce and Trade held in Chengdu, Sichuan province, last month, the source said.

During the two-day meeting China said it will make IPR protection a national long-term task.

Vice-Premier Wang Qishan promised to create, and lead an office, on IPR protection.

"The Chinese delegation said the nation will strengthen efforts and increase investment on advancing software legalization in government departments," the source said.

China's foreign business environment has been criticized in recent years by some foreign enterprises.

Their concern focused on three main areas - IPR protection, government procurement and market access.

"Software legalization is a major concern for foreign businesses in China so the plan is a significant move that demonstrates the country's determination and sincerity," Zhou Shijian, a senior expert on China's economy and trade at Tsinghua University, said.

"It also means that China will have to spend huge amounts on the project."

China initiated a six-month campaign in October last year to combat pirated goods and protect patents, trademarks and copyright for a wide range of domestic and foreign goods, including books, videos and software.

The State Council said in November that provincial governments will complete the software legalization by the end of June next year.

"We're encouraged by China's statements and increased efforts in legalization and enforcement," said a spokesperson for Microsoft China, who declined to be identified.

"We see lots of opportunities for continued improvement on intellectual property protection in China and we are hopeful they will lead to meaningful and lasting results."

Foreign enterprises enjoy advantages and are favored in government procurement but domestic companies are optimistic.

"The volume (of government procurement) is high but profit margins are not big," said Wang Zhantao, marketing director of Beijing Rising International Software Co Ltd, China's leading anti-virus software maker.

"Foreign counterparts generally are more competitive and can usually win more orders as they have a wider range of products than domestic players," he said.

Statistics showed that from 2007 to 2010 government procurement of software, including database, operating systems and anti-virus software, was worth 1.07 billion yuan.

The majority of software orders went to foreign brands, including Microsoft, Oracle and IBM.

Only in anti-virus software did the domestic company, Rising, get more than half of the orders.

"I am concerned whether the preference (choosing foreign brands) will continue, but I strongly suggest that the government turn to local brands," Ni Guangnan, a researcher with the Chinese Academy of Engineering, said.

"As long as they have good quality and are competitively priced, domestic software should be a good buy. We needn't blindly give preference to imported software," he said.

Vice-Premier Wang said recently at a meeting of representatives from foreign businesses in China that foreign enterprises still enjoy preferential policies.

"In terms of government procurement, products made by foreign companies are favored in many of the deals made, especially by local governments," Wang said.