Since when have the World Trade Organization rules been able to overrule a nation's laws? Does the World Trade Organization not recognize China's sovereignty?
Contries that sign on to the WTO agree to play by certain rules (although they rarely do). Protectionism and world trade are natural enemies, and the WTO tries to remove protectionism as best as it can. Of course, this move by China may not be a form of protectionism as they do have the right to buy whatever they want, they would simply have to word their new rules in such a way so that it doesn't appear to be protectionism. If you think about it, if they choose Linux, it's not really protectionism as Linux isn't Chinese made anyway.
When I worked at some Gov of Canada sites, they told us it was government policy to use Canadian software when possible, which meant we were stuck with the horrors of Corel and WordPerfect!!!
- Mike