Firefox fans will be facing 2007 with more tranquillity than they did 2006. A year ago, it was clear that Firefox's free ride was about to end: after an astonishing five years of inactivity, Microsoft was finally launching an updated version of Internet Explorer. There seems little doubt that much of Firefox's success is down to the fact that Internet Explorer was so bad, both in terms of the eternal round of security problems and its general technical tiredness (half a decade is a very long time in computing.)

Potentially, them, the appearance of Internet Explorer 7 could have marked the high-water point for Firefox, as the Microsoft machine went into overdrive and began clawing back the market share it had lost since Firefox's arrival. But when the final version of Internet Explorer 7 appeared in October last year, the verdict was almost unanimous: it was not a Firefox-killer. To be sure, it was much better than IE6, but that had set the bar pretty low. Aside from offering tabs and a few much-needed security enhancements, IE7 was definitely in the ho-hum category. Firefox seemed safe for at least another year or two.

It is not. For the real challenger comes not from Microsoft directly; instead, it's from a new browser that uses IE's rendering engine, Trident, but which is produced completely independently of the company. This means that it can offer all the "benefits" of 100% compatibility with what is still the dominant Internet browser, together with a host of real improvements - some of which go beyond even Firefox.

This new competitor is called Maxthon, and, significantly, comes from China. This is relevant because the Chinese computer sector has tended to evolve according to its own rules. So while many sensible Westerners have seen the light and converted from Internet Explorer to Firefox, this is by no means the case in China. On the contrary: according to a recent interview with one of Maxthon's executives, Maxthon holds around 30% of the Chinese browser market, while Firefox is nowhere. Put that figure together with the fact that there are currently 132 million Internet users in China, up 30% from last year, and likely to grow even more in the future, and you have a situation where Maxthon's installed base probably already rivals that of Firefox.

That on its own would be bad enough; worse is that fact that the Maxthon browser is going to be being pushed aggressively outside China. The company behind it has received several rounds of investment, and now has the funds to make a big impact in the West.

Worst of all, perhaps, is that the Maxthon browser is actually better than Firefox. That is, it offers all of the features we have come to know and love on Firefox - tabbed browsing, adblocks, skins, plugins - together with several innovative ideas, such as automatic detection of RSS feeds, built-in Babel Fish translation, quick links to Google's cache, mouse gestures as standard, and plugins for Gmail, Hotmail, Bloglines, and coComment already installed.

I said that Maxthon offers all of the features of Firefox, but there is actually a rather important one that is missing: freedom. Although Maxthon is free as in beer, it is not free as in freedom. For readers of this blog, that will probably be the showstopper in terms of using Maxthon, but for the other 99.99% of the world, it is largely irrelevant. Maxthon may only work on Windows, but the market share of non-Windows desktops is currently small, so this is not a major issue either. The fact is that Maxthon could well be the best browser out there for most non-technical users who either are unaware of or don't care about deeper issues of freedom.

This is extremely dangerous for Firefox. Although Firefox 2.0 is widely regarded as superior to IE7, it is not that much better: it has no really stunning new features, and the old memory leak still seems to be dripping away (Firefox regularly eats up 200-300 Mbytes on my systems). In other words, it is hardly invulnerable to a bright, brash new entrant like Maxthon.

There is a danger that the Firefox world is starting to rest on its laurels and become complacent: this could be fatal for the Fox. The last thing it can afford to do is sit back and take its position as the coolest, most innovative browser around for granted. It can't even point to its highly successful SpreadFirefox community as an unbeatable trump card: Maxthon too has an extremely active and enthusiastic community behind it, which provides bug reports and evangelises the product.

Unless some serious thinking goes into how to make Firefox 3.0 not just better, but also truly exciting once more - and I don't mean just adding things like microformats - I fear that 2007 may finish much worse than 2006 did for the Firefox world.

Glyn Moody writes about free software at opendotdotdot.