Updated

China postponed a plan to require personal computer makers to supply Internet-filtering software Tuesday, retreating in the face of protests by Washington and Web surfers hours before it was due to take effect.

Manufacturers would have been required to include filtering software known as Green Dam with every computer produced starting Wednesday for sale in China.

The official Xinhua News Agency said regulators "will delay" the plan but gave no indication whether it might take effect later. It gave no other details.

Top U.S. trade officials had protested the plan as a possible trade barrier. Industry groups warned that the software might cause security problems. Free-speech advocates attacked the plan as censorship.

American diplomats met earlier with Chinese officials to express concern about the plan.

"I think the cost of the move from trade friction and generally a public relations black eye was becoming pretty clear to the government," said Duncan Clark, chairman of BDA China Ltd., a Beijing research firm.

• Click here for FOXNews.com's Personal Technology Center.

• Got tech questions? Ask our experts at FoxNews.com's Tech Q&A.

The postponement "gets them out of the scrutiny of the international media and business," Clark said.

Chinese authorities said Green Dam is needed to shield children from violent and obscene material online. But analysts who have reviewed the program say it also contains code to filter out material the government considers politically objectionable.

Chinese Web surfers ridiculed the software and circulated petitions online appealing to Beijing to scrap its order. They said Green Dam would block access to photos of animals and other innocuous subjects.

News of the announcement spread in China quickly via Twitter and the Chinese mini-blogging site Fanfou.

Wen Yunchao, a Chinese blogger who has been among the most vocal critics of Green Dam, said he did not believe the announcement marked an end to the plan.

"They are using the word 'delay,' instead of saying they stopped the plan," Wen said. "I think that it's possible that at some point in the future the government could still enforce their policy and install software on personal computers that filters the information people are able to look at. So, I am calling this an intermediary victory."

China's communist government encourages Internet use for education and business, and the country has the biggest population of Web users, with more than 298 million. But authorities try to block access to material deemed obscene or subversive and Beijing operates the world's most sweeping system of Internet filtering. The new software would raise those controls to a new level by putting the filter inside each PC.

China is important to PC makers both as a major manufacturing site and a fast-growing market. It accounts for up to 80 percent of world production.

Producers including Toshiba Corp. and Taiwan's Acer Inc. said they were ready to provide Green Dam on disk with PCs beginning Wednesday. But industry leaders Hewlett-Packard Inc. and Dell Inc. declined to discuss their plans, possibly waiting for a diplomatic settlement.

Acer already has shipped some Green Dam disks with computers, said Meng Lei, a spokeswoman for the company in Beijing.

"For now, we will go ahead with the original plan, which was to distribute the software," she said. "Moving forward, we will pay attention to future developments."

The Green Dam initiative coincides with a tightening of government controls on Internet use.

Last week, the Health Ministry ordered health-related Web sites that carry research on sexually oriented topics to allow access only to medical professionals.

Also last week, the government issued new rules on "virtual currency" used by some game Web sites, saying it cannot be used to purchase real goods.

Green Dam already is in use in Internet cafes in China and has been installed since the start of this year in PCs sold under a government program that subsidizes appliance sales in the countryside, according to manufacturers and news reports.

"All the computers in this 'Appliances to the countryside' program had this installed or received it on disk," said Yi Juan, a spokeswoman for Great Wall Computer Ltd., a leading domestic PC manufacturer.

Yi said she had no details on how many PCs were sold with the software or whether users reported problems. Asked whether customers knew PCs had Internet filters, she said she did not know whether they were informed, but said, "they should know."