It wasn't just the money. Red Flag's product's failed to thrill consumers. The Chinese people, it seemed, favoured proven systems like Microsoft over a weaker national brand. "It is difficult to say whether I like or hate Red Flag," said a government software engineer in Beijing who had been using the system for a time. "The team definitely made some progress, but most ordinary users would not be impressed," he said, declining to be named due to his job's sensitivity.

"Using the system was like riding a bicycle on [a ring road]. It was politically correct, even cool sometimes, but quite exhausting - and always lonely."

The bankruptcy appears to have been unexpected because the central government had recently renewed a push to install home-grown operating systems on domestic computers. The Communist Party has been busy expressing frustration about the high cost of foreign technology and investing billions of dollars to develop its own phone, encryption and software industries.

Meanwhile, regulatory pressure is being applied to foreign technology companies; on Tuesday, China's anti-monopoly agency announced it had launched an investigation into Microsoft back in June.

The State Administration for Industry and Commerce said it was looking into complaints that Microsoft improperly failed to publish all documentation for its Windows operating system and Office software. This week, its investigators visited Microsoft's China headquarters in Beijing and branches in Shanghai, Guangzhou and Chengdu, Sichuan province.

Despite promises of greater support for Chinese operating systems developers, Red Flag's struggle is not an isolated case.

According to a report by the CAS Institute of Software this year, home-grown operating systems account for less than 1 per cent of the market share on the mainland. Domestic companies such as Linux Deepin and Kylin OS remain obscure.

Chinese consumers prefer mainstream foreign systems - Microsoft Windows for desktop computers and Google Android on mobile devices - because they are reliable, easy to use and supported by an enormous number of third-party applications. They are also able to ward off most viral attacks because they are routinely scrutinised by informationsecurity companies worldwide.

Wang Lei, a university student in Shanghai, said he supported the development of home-grown operating systems - but would not switch over to one until they were as good as their overseas competitors. "Saying no to foreign operating systems is as silly as saying no to foreign cars," he said. "That's not patriotism; it's xenophobia."

The dream of a "made in China" operating system to rival the likes of Windows and Apple iOS has been fuelled by a government fear of cyberattacks. After last spring's accusation by the US that PLA members were hacking into American corporations, Beijing complained that hundreds of millions of computers in China had been infiltrated in overseas cyberattacks.

But the fate of Red Flag is indicative of the struggle China faces in this arena: its desire for a trustworthy home-grown operating system is bogged down by technical incompetency and the stifling cost of subsidising development.

In the eyes of professional computer hackers, these home-grown operating systems have provided a perfect host for security bugs.

Because of the small number of users of domestic systems, most of the software is not regularly updated with security patches, so they are vulnerable, the experts say. Hackers have the tools to sniff out weak spots in these systems, which can then be used to launch cyberattacks.

Few software developers bother to write apps or drivers for the systems. Users have to cross their fingers when connecting a printer or digital camera because the hardware maker might never have heard of these operating systems.

China, however, apparently intends to keep pushing forward with its domestic operating systems.

Zhang Feng, chief engineer with the Ministry of Industry and Information Technology, told China Central Television in May that his bureau would again increase its investment in home-grown operating systems. He urged domestic users to shift to these products in the belief that they would be more resistant to attack by foreign hackers.

Liu Qing, an information security expert in Shanghai, said the authorities' desire for a Chinese operating system was understandable. "There is always the fear that other governments can sneak in via secret back doors hidden in a foreign operating system," he said.

Liu also cautioned that home-grown operating systems could be more vulnerable than the mainstream international alternatives. "A new system usually contains more security bugs than an old system," Liu said. "And if the new system has few users, many of these bugs can stay there for a long time, if not forever. That makes infiltration easy."

Microsoft constantly updated WindowsXP with the help of security companies around the world contributing in the effort to patch any holes in the system. A security bug was as dangerous to an American customer as to a Chinese or an Egyptian customer using the same operating system. Liu added.

Earlier this year, the Chinese government banned public sector agencies and state-owned enterprises from installing Windows 8 on all computers. No reason was given. Instead, the government offered an option to buy any number of domestic operating systems through its procurement system.

However, the computers in Beijing Aerospace Flight Control Centre's command room, for instance, still run on Windows XP because the space project needs software that's reliable and consist, according to mainland space scientists.

For home-grown systems targeting mobile devices, there is the ambitious China Operating System, a project involving CAS and a software company in Shanghai which aims to compete with Google's Android and Apple's iOS mobile platforms.

Again, it has had a negligible impact on the preference for most Chinese users to stick to those international mainstream products.

Mainland smartphone makers such as Huawei and Xiaomi still base their operating systems on Android to save costs and increase their devices' compatibility with software and hardware, according to mainland media. Nearly all mobile devices in the mainland market today are reportedly based on either Android or Apple iOS.

Some domestic systems continue to strive to reach a bigger audience.

The biggest domestic operating-system developer in terms of number of users is Standard Software, which was established by the China Electronics Technology Group and China Electronics Corporation.

Standard Software's NeoKylin system is used in critical computing systems in government, finance, education, taxation, public security, auditing, transportation, health care, manufacturing and in the military, according to information on the company's website.

The system has been free to download, but feedback from mainland internet users has been mostly negative on user friendliness and compatibility with software and hardware.

For example, the system could not run Tencent QQ, China's most popular instant message service, which grew from two users in 1999 to more than 200 million this year.

Additional reporting by Associated Press