According to the London-based Financial Times and Hong Kong's The Standard, the reversal came, in large part, because of central government criticism that Beijing wasn't toeing the buy-China party line.
The deal, first announced November 17 on Beijing's procurement site, was to have provided the city with Windows and Microsoft Office.
National officials took exception to the purchase. Li Wuqiang, an official at the Ministry of Science and Technology, last week accused local governments of ignoring "national interest and security" by buying foreign software, said the Financial Times.
The issue of purchasing non-Chinese software is a touchy subject. Chinese officials typically roll out a variety of arguments, ranging from national security to market monopolies to deflect attempts by some Western firms to gain a foothold. Instead, China is trying to grow its own software industry, which increasingly has turned to open-source options such as Linux.
Beijing's back-out would be a blow to Microsoft, which has recently struck deals with other Chinese city governments, including those of Tianjin and Shanghai, even though the country's Government Procurement Law is intended to give homegrown products preferential treatment.
Government contracts are important for software makers in China, said the Financial Times, since so much of the software used privately or in business in that country is pirated.