China has long been a difficult market for Microsoft. For years, it struggled to contend with widespread piracy of its Windows and Office software.
In July 2014, four of its offices in China were stormed by officials who questioned executives, copied contracts and records and downloaded data from the company’s servers. What was described as an antitrust inquiry was spurred by Microsoft’s decision to end support for older Windows software to encourage users to switch to newer versions that were more difficult to pirate, according to analysts. The withdrawal of support for a still widely used, if dated, version of Windows only underscored the country’s reliance on foreign software.
In 2017, to ensure state support for Windows, the company partnered with a state-run firm to produce a government-approved version of its Windows 10 software. The firm, Chinese Electronics Technology Corporation, makes electronics for the Chinese military and is a major vendor of surveillance technology in Xinjiang, where the government has thrown hundreds of thousands of Uighurs, a local Muslim minority, into re-education camps.
Beijing has insisted on closer scrutiny of software used by government agencies and companies since Edward Snowden, a former American government consultant, revealed that United States intelligence agencies used American technology for hacking purposes.
Despite the difficulties, foreign companies still hold out hope for access to China, which with its size and its thriving mobile phone culture represents a potentially vast market. LinkedIn and Airbnb still have businesses there, though they take pains to comply with local laws. LinkedIn, which Microsoft bought in 2016, censors content in China, and Airbnb coordinates with local authorities to provide access about who is staying at its listings.
But trade tensions between China and the United States are only adding to the difficulties. Many American companies, along with Trump administration officials, accuse China of systematically forcing American companies to hand over their intellectual property to local partners or to government officials in the name of national security. So far, China has stopped short of boycotting American products, which could escalate the trade conflict and damage the Chinese economy.
Baidu’s falling reputation led to some support among China’s intelligentsia for a re-entry by Google into the market with a censored search engine internally code-named Project Dragonfly. Its plans led to widespread criticism from Google’s own employees. Some Chinese activists also protested, arguing a censored search would be tantamount to complicity with Chinese censorship. Google’s chief executive, Sundar Pichai, has said it is “not close to launching a search product in China.”