One of two companies linked to a nationwide Internet pornography-filtering project refuted reports on Tuesday that the controversial software has been halted.

The "Green Dam - Youth Escort" Internet content-filtering software, which aroused opposition due to privacy and security concerns at home and abroad last year when it was launched, is facing funding difficulties, the Beijing Times reported.

Authorities have stopped funding the distribution and maintenance of the software, a move that could halt the project, the paper reported on Tuesday, citing a general manager of one of the two companies concerned.

But the same person rejected the report, saying the company just moved the office to a new location because of financial problems.

According to the Beijing Times, the project's Beijing team was closed down at the end of June. It quoted Chen Xiaomeng, general manager of Beijing Dazheng Human Language Technology Academy, which co-developed the program with Zhengzhou Jinhui Computer System Engineering.

The two companies jointly set up two project offices - one in Beijing and one in Zhengzhou, capital of Henan province - to distribute and update the software after the Ministry of Industry and Information Technology (MIIT) paid them 41.7 million yuan ($6.2 million) in 2008.

About 30 members of the Beijing support team who had been in charge of upgrading the Green Dam's website and promoting the software were laid off, the Beijing Times reported. The support team in Zhengzhou is also short of money and will not last long without immediate funding. This means Green Dam's 20 million users will lose technical

and customer service support, the newspaper said.

But in another interview by TechWeb, a technology news portal, Chen said his company is still providing services.

"We just stopped using our former office," he said.

Chen refuted the Beijing Times report, adding that reports about the closure of the team's office and dismissal of about 30 employees were also untrue.

"We are going to publish clarifications," he said.

Chen added that even without State funding, the company will continue to provide free services to users of the software.

MIIT Minister Li Yizhong earlier said the government-funded free filtering software prevents minors from accessing harmful information and enables them to "grow in a healthy environment".

The government funding covers the software development cost and one year of technical support, so users are able to download and upgrade the software free of charge. However, the project teams failed to receive more financial support from the MIIT since May last year, despite efforts to seek more funding from the ministry, the Beijing Times reported.

The MIIT announced in May last year that starting July 1, all computers sold in the country must pre-install Green Dam. But after strong opposition from both foreign and domestic PC makers as well as users over security concerns, the installation was restricted to schools and Internet cafes.

Ministry officials at the MIIT could not be reached for comment.

According to an earlier survey conducted by sohu.com, one of the country's most popular web portals, more than 80 percent of Chinese PC users said they are against the compulsory installation of the software and will not use it.

Chinese consumers were worried that the software could violate their rights to freely search the Internet as adults. They were also concerned that potential bugs in the software would expose their systems to computer viruses.

A US company called Cybersitter also accused Green Dam of copying code from its own software and filed a copyright infringement lawsuit for $2.2 billion early this year.

MIIT Minister Li admitted last August that the government's decision to install the software was "not thought of well enough".