Silicon Valley-based BEA Systems has formed an alliance with Beijing's municipal government to develop new software products in the mainland based on Chinese intellectual property. Under a deal signed last December, BEA also committed to help build and promote the public IT support infrastructure for Beijing's budding software industry. Alfred Chuang, BEA's Hong Kong-born founder, chairman and chief executive, said he hoped this would usher in new growth direction for China and kick-start the firm's own research and development (R&D) operations in Beijing. 'Use of Chinese intellectual property gives us and other mainland firms the opportunity to create new software products for export.' BEA will register the trademark and copyrights of its Tuxedo software in China. This middleware will then be used as the basis for new software R&D work to be undertaken from May at the company's Beijing facility. New software products are expected to be ready next year. BEA will try to obtain the distribution rights for Tuxedo in most countries in Asia-Pacific, subject to favourable intellectual property protection arrangements. Before this alliance, BEA's China subsidiary formed a partnership to develop and market its software with Red Flag Software, the Beijing-based Linux developer backed by the Chinese Academy of Science. BEA's flagship product, WebLogic, provides a software foundation that allows enterprises to develop, integrate and expand their business programs and processes to reach suppliers, partners and staff. 'China has proved it can compete with the world on the price of its labour but that is a market of diminishing returns,' Mr Chuang said. He stressed that 'software was the key' for China to create 'a sustainable, intellectual-property-based economy that could compete on an equal basis against the rest of the world'. In its 10th Five-Year Plan that covers 2001 to 2005, China targeted a growth of more than 30 per cent annually for its software and IT industry. That is expected to bring total IT market sales up to nearly US$20 billion by next year. China also expects to build 20 large software companies with revenues exceeding $120 million and more than 100 famous software brands.