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More than two decades of Microsoft's efforts to gain a foothold in China could soon pay off in part if it manages to buy TikTok's US business.
However, as relations between the United States and China continue to deteriorate, the software company's long-term bet on the Chinese market is also facing the most uncertain phase to date.
Microsoft's involvement in the Chinese technology world, which has arisen since the establishment of a research center in Beijing in the late 1990s, has left important personal ties. Zhang Yiming, the founder of ByteDance, the company that owns TikTok, worked at Microsoft, but only a few months before joining a start-up.
It was not uncommon at the time: Microsoft's research laboratory was known in China in the late 1990s and 2000s as an incubator for entrepreneurs who then drove the country's tech explosion. The company has nurtured a lot of talent – from Yin Qi, the founder of the facial recognition giant Megvii, to Lin Bin, the co-founder of the mobile phone manufacturer Xiaomi.
Selection of the litter
At that time, the freedom and global platform that Microsoft offered for cutting-edge IT research was unprecedented in China. Microsoft Research had the choice of the best doctoral students in the country.
"All existing connections between ByteDance and Microsoft meant that there were trustworthy channels of communication that could be used," said a former Microsoft China manager who added that Mr. Zhang was close friends with former Microsoft Vice President Harry Shum. whose protégé Ma Wei-Ying was Head of the Artificial Intelligence Department at ByteDance until last month.
Microsoft also worked to build links with China's political elite. The company's founder, Bill Gates, was one of the few foreign executives to meet three Chinese presidents in a row from 1995 when Microsoft came to China. Five years ago, President Xi Jinping visited Microsoft's headquarters in Redmond, Washington, where he praised the company for "driving the development of the Chinese ICT industry."
In July, Microsoft was the only US company to be invited to a televised entrepreneurial summit with Mr. Xi. The closeness of the relationship has made it a sore point for some in the Trump administration.
Peter Navarro, the White House's trade advisor, attacked Microsoft's idea of buying TikTok and raised questions about how the US group managed to keep their Bing search engine alive on the Chinese Internet there. "
In addition to Bing, the only foreign search engine consistently available in China that censors Chinese search results but limits it to mainland Chinese users, Microsoft owns two of the top three non-blocked foreign platforms with user-generated content. These are LinkedIn, the professional networking website, and GitHub, a code sharing website for developers. The third is the Amazon website rating system.
Rebecca MacKinnon, director of Ranking Digital Rights, noted that Microsoft shut down its blogging platform in 2005 after being criticized for removing a Chinese journalist's blog. She added that it also didn't release a Chinese version of Outlook [its email service]. They deliberately avoided that. "
Ms. MacKinnon said the company is strict due to the attention of EU regulators when it comes to geographic data collection and that the Chinese government's requests are unlikely to pose a threat to US data. The China activities “are making greater efforts to minimize the risks for Chinese users. A Chinese company has fewer options. "
Protecting users from Beijing is now becoming more difficult with the adoption of the Hong Kong National Security Law, which gives the region's authorities extensive powers to monitor political dissidents. In July, Microsoft announced it would stop responding to Hong Kong authorities' data requests.
Microsoft's research in China, arguably the strongest asset of the past two decades, has included working with researchers from the military-controlled Chinese National University of Defense Technology.
It is very easy to manage the company's research staff. Restricting research collaboration is "a really difficult question – research in itself is a very liberal environment," said a second former Microsoft China manager. "People may ask questions [research collaborations], but from our researchers' perspective, they want to work with the best partners they can find in their field," added the executive.
Microsoft has a strong position in China – about 90 percent of the country's PCs use the Microsoft Windows operating system, and until recently, many government websites only ran correctly in the Internet Explorer browser – but didn't benefit much from it financially. A long battle against software piracy, which has brought with it many years of delicate diplomacy with Chinese law enforcement agencies, has brought only minor victories.
A massive presence, but …
“It is not difficult to find Microsoft software in China and even in Chinese government institutions. It is much more difficult to find Microsoft software that Microsoft has paid for, ”said Brad Smith, president of Microsoft earlier this year. He put Microsoft's China business at just 1.8 percent of global sales.
The global shift from Microsoft's focus to its Azure cloud services has also been difficult in China, where the cloud sector has high barriers to entry for foreign players. Although some executives wanted to pull the loss-making cloud business out of China, managing director Satya Nadella vetoed the decision, according to a Microsoft consultant.
"China has an elephant memory: once you pull it out, it's very difficult to get back in," said the adviser. Microsoft declined to comment on the matter.
However, Microsoft is committed to maintaining its research base in the world's second technology superpower, as well as maintaining the good relationships that have brought TikTok to the negotiation table.
In December last year, Microsoft started its China Alumni Network with a WeChat contribution entitled "Once a Microsoftie, always a Microsoftie!"
"Microsoft alumni can be a positive ambassador and ambassador for China-US relations," said Zhang Yaqin, president of the Chinese search group Baidu.
The second former CEO of Microsoft China added: “Microsoft's soft power in China is immense. Chinese employees who leave the company mostly have a soft spot for Microsoft. "
However, the company has to be careful with ByteDance, avoid the impression that it is using a forced sale, and may even offer to sell part of its Chinese assets in return, according to two people close to the situation.
So far, there has been little anger from Beijing or Chinese nationalists about its deal under discussion. "The prevailing view is that the Chinese government will not retaliate against Huawei as much as it does against Huawei," said Rui Ma, author of an upcoming book on ByteDance.
How long Microsoft can navigate in the growing political divide – and whether it can maintain its technology base in China and ultimately benefit more from it – is another question. Mr. Gates and Mr. Nadella have a "global mindset", according to Microsoft China's former executive. But he added that it was "rigorously tested by current US policies" and that Redmond executives may be wondering what their long-term strategy for China is.
Another former Microsoft China manager noted that the company's good relationships "will not change China's future," which aims to replace foreign technology with domestic alternatives.
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