Microsoft has slashed the price of its Windows Vista operating system by more than half in China, in a move designed to wean buyers off pirated copies of the software.

The world’s largest software developer cut the retail price for its basic version of the software by two thirds to 499 yuan (£32) and the premium package by half to 899 yuan.

Last month, pirated software worth more than £242 million was seized by authorities in China as part of a joint operation run by Chinese police and the FBI that underscored the extent of the problem.

The syndicates targeted by the raids in the southern Chinese province of Guangdong are believed to have distributed more than $2 billion (£968 million) worth of counterfeit software to countries around the world, including the UK.

The Vista price cut is not the first time Microsoft has revisited pricing policies in China, which it expects to become its most important market.

It has already cut prices for earlier versions of Windows to as low as £1.50 for students.

For years after entering the country in 1992, Windows struggled to make its mark, in large part because of an uncompetitive pricing system and the Chinese authorities’ decision to adopt the rival Linux system.

There are now signs that Microsoft is gaining traction in China — a feat that Bill Gates, the group’s founder, has suggested has been aided by the vast volume of the company’s software that has been bootlegged by Chinese pirates, making Windows the nation’s de facto standard.

"It's easier for our software to compete with Linux when there's piracy than when there's not," he recently told Fortune magazine.

A recent global software piracy study by the Business Software Alliance showed that China's piracy rate had retreated by 10 per cent in the past three years — but only to 82 per cent from 92 per cent.

Bootlegging in China is estimated to have cost the software industry $5.43 billion last year — more than four times the value of the legitimate market, despite a near-90 per cent annual increase in sales.

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