Illegal software usage in China stood at 92% as recently as 2003. The reduction of 10 percentage points over three years avoided $864 million in losses for legitimate software providers, according to IDC.

Meanwhile, the size of China's legitimate software market grew to $1.2 billion in 2006, an 88% increase from the previous year, the report said.

The gains have come even as industries such as Hollywood film studios and luxury-goods makers complain that Beijing has made little progress in curbing illegal copies and knockoffs of their products.

That contrast highlights how solutions to piracy and counterfeiting problems can vary for different types of products.

The relatively small number of personal-computer manufacturers has made it easier for Beijing to focus its efforts, while it has proved much more difficult to get a handle on the large numbers of small operations producing and selling pirated DVDs.

In early 2006, China started requiring computer makers to install at the factory legitimate copies of operating-system software. That overturned a longstanding practice of selling most computers as empty boxes, and quickly led to increased sales of legitimate software.

The government has also led campaigns to get state enterprises and local government offices to purchase legitimate software.

"There's been consistent work to bring down the piracy level. The momentum should continue building," said Jeffrey Hardee, regional director for Asia at the Business Software Alliance, whose members include Microsoft Corp., Autodesk Inc. and Adobe Systems Inc.

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