Nearly four years into the adventure and Red Flag, which has never made money, has only managed to capture 25% of the local Linux market, thanks mainly to its captive business with certain government agencies. Market leadership belongs to Turbolinux, which by Red Flag's count owns 40% of the market, according to US sources close to the Chinese company.

Sources say Red Flag hasn't kept pace with Linux development, which evidently explains why president and CEO Liu Bo was bounced in December. Conspiracy theorists might be persuaded to think that it's all Microsoft's doing since Liu Bo used to run Microsoft China and could be a Microsoft plant.

Anyway, Turbolinux, a failed American operation that got started in China and is now owned by a Japanese company, and Miracle Linux, the Japanese operation that Oracle owns a piece of that optimizes Turbolinux for Oracle widgetry, are both supposed to be technically richer and more state-of-the-art than Red Flag, and both support Mandarin.

As a result, China could reportedly dump Red Flag - in a face-saving way, of course, like merging technologies - and take up with Miracle Linux and Turbolinux, which is reportedly still in the deep financial trouble that forced the Americans to sell it.

Consider that Red Flag and Miracle formed a joint venture in January to create a unified Linux platform for Asia that would harry Microsoft - at least on the server side. The two also share some desktop aspirations. Miracle is supposedly thinking about distributing Red Flag's desktop Linux in Japan.

The unified system, which conveniently gives Red Flag and Miracle a common kernel, is called Asianux and is supposed to be ready by May.

Notice too that Red Flag and Miracle have a joint support center at Oracle's Beijing facility.

In the background somewhere are American midwives like software giants Oracle, which already has a strategic alliance with Red Flag, and Computer Associates, which has publicly pledged to support Turbolinux and Miracle Linux, pushing things along on the theory that China can't succeed without strong outside Linux software.

Besides, there's a good bit at stake here. Asianux is evidently the Asian Linux that China, Japan and South Korea agreed to unite behind last September in a flip of the bird to Microsoft.

Sources claim the dominant distribution is evolving and that there's a lot of jockeying for position. Meanwhile, Windows still appears to reign if only because of widespread piracy.

IBM doesn't appear to be involved (the Chinese reportedly don't trust them) and neither does Sun (the Chinese are reportedly ticked at Sun CEO Scott McNealy for grandstanding and blowing the Java Desktop System's deal with the Chinese out of proportion.)

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