TikTok sale could jeopardize Microsoft’s future in China

The US tech company hopes its connections will help you navigate safely.

More than two decades of efforts by Microsoft to take root in China may soon bring a partial reward, if it manages to drive the purchase of the American business from TikTok.

But as US-China relations continue to deteriorate, the software company’s long-term bet on the Chinese market is also facing its most uncertain period.

Microsoft’s involvement in the Chinese technology world, which dates from the creation of a research center in Beijing in the late 1990s, has left him with important personal connections.

TikTok Agreement with Microsoft

Zhang Yiming, the founder of ByteDance, the company that owns TikTok, worked at Microsoft, albeit only a few months before leaving to join a new company.

That wasn’t unusual at the time: Microsoft’s research lab was known in China as an incubator for entrepreneurs in the late 1990s and 2000s, who later fueled the country’s tech explosion.

The company has cultivated a lot of talent, from Yin Qi, the founder of facial recognition giant Megvii, to Lin Bin, co-founder of mobile phone maker Xiaomi.

Back then, the freedom and global platform that Microsoft offered for cutting-edge computer science research was unprecedented in China.

Microsoft Research had the choice of the best PhD graduates in the country.

“All of the pre-existing connections between ByteDance and Microsoft meant there were reliable lines of communication that could be leveraged,” said a former Microsoft China executive, adding that Zhang was a close friend of former Microsoft vice president Harry Shum, whose protégé, Ma Wei- Ying, was head of artificial intelligence at ByteDance until last month.

Microsoft also worked on building connections with China’s political elite.

The company’s founder, Bill Gates, was one of the few foreign executives who met with three Chinese presidents in a row, starting in 1995, when Microsoft entered China.

Five years ago, President Xi Jinping visited Microsoft’s headquarters in Redmond, Washington, where he praised the company for “driving the development of China’s ICT industry.”

In July, Microsoft was the only American company invited to a business summit with Xi. The closeness of the relationship has made it a pain point for some in the Trump administration.

Peter Navarro, the White House business adviser, attacked the idea of ​​Microsoft buying TikTok and raised questions about how the US group managed to keep its Chinese Internet search engine Bing alive, saying: “We know that some suspicious things are happening there. . ”

In addition to Bing, which is the only foreign search engine constantly available in China, and which censors Chinese search results, but says this is limited to users in mainland China,

Microsoft owns two of the top three unlocked foreign platforms that contain user generated content.

These are LinkedIn, the professional networking website, and GitHub, a code share site for developers. The third is the Amazon website review system.

Rebecca MacKinnon, director of Ranking Digital Rights, noted that Microsoft had withdrawn its blogging platform in 2005 after being criticized for removing the blog of a Chinese journalist. She added that she also “did not launch a Chinese version of Outlook (her email service). They have deliberately avoided it.”

Ms MacKinnon said the company was strict in its geographic data ring due to EU regulatory attention, and was unlikely to allow Chinese government requests to pose a threat to US data. Regarding their operations in China, “they are making more efforts to minimize the risks for Chinese users. A Chinese company has fewer options. ”

Protecting Beijing users will be more difficult now with the passage of Hong Kong’s national security law, which gives authorities in the region broad powers to monitor political dissidents.

In July, Microsoft said it would pause to respond to requests for data from Hong Kong authorities.

Microsoft’s research in China, arguably its strongest asset in the past two decades, has also included collaborations with researchers at the military-controlled China National University of Defense Technology.

The company’s management of its research staff is very light. Limiting research collaborations is “a really tough question: Research is a very liberal environment in and of itself,” said a second former Microsoft China executive.

“People might question (the research collaborations) but from the point of view of our researchers, they want to work with the best partners they can find in their field,” added the executive.

But although Microsoft has a strong position in China (approximately 90 percent of personal computers in the country use the Microsoft Windows operating system, and until recently many government websites only functioned correctly in the Internet Explorer browser), it has not been financially benefited a lot.

A long battle against software piracy, which has involved many years of delicate diplomacy with Chinese law enforcement officers, has yielded only small 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 for which Microsoft has been paid,” said Brad Smith, president of Microsoft, to earlier this year. It put Microsoft’s scale of business in China at just 1.8 percent of its global revenue.

Microsoft’s global shift in focus to its Azure cloud services has also faced difficulties in China, where the cloud sector has high barriers to entry for foreign players.

Although some executives wanted to remove China from the loss-making cloud division, Chief Executive Officer Satya Nadella vetoed the decision, according to a Microsoft consultant.

“China has a memory like an elephant: once it withdraws it is very difficult to re-enter,” said the consultant. Microsoft declined to comment.

However, Microsoft wants to both maintain its research base in the world’s second-largest technology superpower and continue to cultivate the good relationships that, in part, brought TikTok to the negotiating table.

In December of last year, Microsoft launched its China Alumni Network, with a WeChat post titled “Once a Microsoftie, Always a Microsoftie!”

“Microsoft alumni can be a positive ambassador and messenger for the China-United States relationship,” said Zhang Yaqin, chairman of the Chinese search group Baidu.

The second former Microsoft China executive added: “Microsoft’s soft power in China is immense. For the most part, Chinese employees who leave have a soft spot for Microsoft. ”

But the company will have to be careful with ByteDance, avoid the impression that it is taking advantage of a forced sale, and potentially even offer to sell some of its assets in China in return, according to two people close to the situation.

So far he has faced little ire from Beijing or Chinese nationalists on his disputed deal.

“The prevailing view is that the Chinese government will not retaliate as much as it did Huawei,” said Rui Ma, author of an upcoming book on ByteDance.

How long Microsoft can navigate the growing political divide, and whether it can maintain and eventually benefit more from its technology base in China, is another matter.

Gates and Nadella have a “global mindset,” according to the former Microsoft China executive. But he added that it has been “severely tested by current US policy” and that leaders in Redmond may wonder what their long-term strategy for China is.

Another former Microsoft China executive noted that the company’s good relations “will not change the future of China,” which is determined to exchange foreign technology for domestic alternatives.

Leave a Reply

Your email address will not be published. Required fields are marked *

%d bloggers like this: