China has banned government use of Windows 8, Microsoft Corporation (NASDAQ:MSFT)’s latest incarnation of its operating system, a powerful blow to the company that has had sales difficulty in one of the world’s fastest growing economies.

China  Microsoft Windows 8

Move to replace Windows XP stunted

“China’s decision to ban Windows 8 from public procurement hampers Microsoft Corporation (NASDAQ:MSFT)’s push of the OS to replace XP, which makes up 50 percent of China’s desktop market,” said data firm Canalys.

Microsoft generates more revenue from Netherlands than China

China has long been a troubling market for Microsoft. In 2011, for instance, former chief executive officer Steve Ballmer reportedly told employees in 2011 that Microsoft earned less revenue in China than in the Netherlands, even though computer sales matched those of the US. The reason given was due to computer piracy.  The new Windows 8 operating system is said to have more sophisticated tools that identify and track individual users with one goal to reduce software piracy.

The official Xinhua news agency said the ban was to ensure computer security after Microsoft Corporation (NASDAQ:MSFT) ended support for its Windows XP.  On a separate note, Microsoft has acknowledged it cooperates with the NSA in allowing the US surveillance agency access to its operating system.

China develops its own operating system

After a 13-year-old Microsoft support agreement ended with China in April, the software firm had hoped customers would switch to the new operating system.  People are hesitant to switch due to the expense, inconvenience and lack of clear product benefits to such a switch. The Chinese government is the biggest buyer of computer software in the Asian nation and its purchasing decisions can significantly impact sales.

China has been developing its own Linux-based operating system, known as COS, in association with HTC Corp (TPE:2498), a developer of mobile software applications for smartphones. COS was developed with the goal to cut China’s reliance on any one software vendor and improve user security.  The new operating system is said to be focused on mobile users.