Jack Schofield reports for the Guardian Unlimited about Microsofts offer to Chinese governements and students to buy a stripped down version of Windows XP (Starter Edition) and Office (Home and Student 2007) for 3 US dollar.
Schofield asserts that piracy has been good for Microsoft in the sense that is has cut out a market for them. Microsoft has decided that it is time for them to start harvesting. 3 US dollar is relatively cheap, compared to the 100-500 US dollar users in the West have to pay for normal versions of Windows XP and Office. This volume low margin strategy might work if the legitimate offer satisfies the former users of pirated software, because of the increased safety due to online updates that are possible.
Read Schofields article here.
Microsoft's other China strategy against piracy is to sell pre-installed software, read more here.