Microsoft has limited exposure to China, but US lawmakers still raise questions

American tech giant Microsoft has come under the spotlight amid rising geopolitical tensions between Beijing and Washington, as US lawmakers questioned the company over its ties to the world’s second largest economy.

Brad Smith, Microsoft president since 2015, disclosed that China only accounted for around 1.5 per cent of its global revenue, but said there are reasons for the company to stay even as the size of its mainland-based engineering team has been reduced.

The reasons for Microsoft to continue its China operations were “to protect American information and trade secrets of American companies who are doing business in China” and to “ensure that [it is] always learning from what’s going on in the rest of the world”, Smith said last week during congressional testimony over computer hacks last year that were linked to China.

Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.

The hearings, where Smith had to assure lawmakers that US national security was being protected as part of its involvement in China tech development, reflect how growing bilateral tensions are impacting American businesses.

A security surveillance camera is seen near the Microsoft office building in Beijing, July 20, 2021. Photo: AP

The tensions are “likely to continue for a long time, which will be a tremendously negative backdrop for US tech companies investing in China”, said He Jun, senior researcher at Beijing-based think tank Anbound.

During the testimony, Smith was asked about his promise to “actively participate in the digital transformation of China’s economy”, an indirect quote published by China’s commerce ministry and attributed to Smith during his visit to the country in December. Smith told the hearings that the words were “not [his] statement”.

Smith said there were areas in China deemed by Microsoft as “appropriate and important” to participate in, but that he did not use the words in the quote.

However, the quote and Smith’s visit to China were widely reported by local media as Beijing seeks to lure more foreign investment in the country.

“It’s been increasingly hard for American companies to operate in China given the rising geopolitical tension between the two countries,” said Thomas Liu, founder and CEO of the consultancy Policy Nexus. “But in the long run, China and the US will benefit from cooperating with each other rather than a conflict.”

Even while maintaining its presence on the mainland, Microsoft has been reducing its China-based engineering team. Smith confirmed that the company is offering to relocate 700 to 800 employees from it China operations overseas. The Post reported in May that some local staff, including those from the Azure cloud computing unit, were offered new work locations such as the US, Australia and Ireland.

People walk near a company logo at a Microsoft office building in Beijing, China, 05 August 2020. Photo: EPA-EFE

Separately, Microsoft announced plans last week to invest US$7.2 billion to develop new data centres in Spain, making it a major cloud computing hub in Europe.

Anbound’s He said Microsoft still has advantages in staying in China. “When [Microsoft founder] Bill Gates came to China [last June], the nation’s president [Xi Jinping] met him. Will Microsoft give up this good ‘soft power’ and reputation to dance to the demands of American politicians?”

More from South China Morning Post:

For the latest news from the South China Morning Post download our mobile app. Copyright 2024.

Follow us on our official WhatsApp channel for breaking news alerts and key updates!

Next In Aseanplus News

Vietnam allows big companies to buy clean energy directly to meet their climate targets
Brunei-Muara all set for get-together with Sultan
Launched: "Guidelines for Provision of Feminist Counselling and Support to Victims/Survivors of Violence against Women"
Indonesian gov receives proposals for seven new SEZs
Singapore’s sovereign wealth fund GIC posts 3.9% annualised return over 20 years
Asian markets track Wall St losses after mixed tech earnings
Social media influencer Aanvi Kamdar suffers fatal fall while filming reel near 300ft gorge
Malaysian star Jack Tan on the advice HK star Tony Leung Chiu Wai imparted to him
Long weekends to generate almost US$500 mil from domestic tourism
Singapore's GIC sees inflation and geopolitical tensions weighing on investments, highlights AI potential

Others Also Read