Microsoft is giving the Chinese government access to the source code for Windows 7 and other key products in an effort to head off any concerns about the security capabilities of Microsoft products.

The review is an extension of an agreement signed in 2006 which enables China immediate access to the source code for Windows 7, Vista, XP, Server 2008 R2, Server 2003, and 2000, and the embedded software CE 6.0, 5.0, and 4.2. Also included is the source code for Microsoft Office 2003 Professional Edition and most other Microsoft products.

The agreement comes on the heels of a recent and somewhat controversial interview in which Microsoft chief Steve Ballmer downplayed the importance of China to Microsoft because of its poor IP protection and said India was a better market, irritating some Chinese.

"China is in a class by itself: There is no software market to speak off. China is a lot less interesting market to us than India or Indonesia," Ballmer said in an interview with Bloomberg. "We do seven times better in India. China can't get a lot worse. We haven't given up on China, but from a Microsoft perspective, we do more business in India; we do more business in Korea."

Though China's authorities have pressured big PC makers like Lenovo to bundle products with genuine copies of Windows, the reality is it still doesn't happen in many cases. China sold more than 40 million PCs in 2009 and is on track to become the largest PC market, yet it accounts for less than one percent of Microsoft's revenue. (Asia, excluding Japan is only 3 percent.)

The government's technical review of Windows source code is one tool the company uses to help Chinese authorities feel at ease using its products and is a key component of a memorandum related to raising software industry cooperation. The government is one of the biggest buyers of information technology in China.

Xu Jiancheng, deputy inspector of the China Information Technology Security Evaluation Center's Department of High-Tech Industry, said: "This … signals the cooperation between the two sides and a step forward. I hope that the partnership between China and Microsoft leads to greater cooperation in the area of information security based on the principle of mutual benefits."

Microsoft calls the program "a global initiative that provides national governments with controlled access to Microsoft Windows source code and other technical information they need to be confident in the enhanced security features of the Windows platform."

The software giant announced the program in early 2003. In a statement, it said: "The GSP is a no-fee initiative that enables program participants to review Windows source code…In addition to source access, the GSP provides for the disclosure of technical information about the Windows platform, enhancing governments' ability to build and deploy computing infrastructures with strong security technologies in place."