Reuters: Microsoft has closed at least 15 branches in China in the past five years, and AI overseas business has become the key to retention
Comparative news, according to a Reuters report, Microsoft has shut down at least 15 Chinese branches and joint ventures in the past five years due to multiple factors such as the tense relationship between China and the US, China's promotion of domestic software substitution, and US export controls, and is implementing a strategic contraction. In 2023, the company considered withdrawing from the Chinese market. Some executives believed that “taking too many geopolitical risks and limited economic returns,” but in the end, it was not implemented. Microsoft disclosed in 2024 that the Chinese business only accounted for about 1.5% of its global revenue.
According to the report, Microsoft finally decided to stay in China, mainly because it has developed a profit path — providing Azure cloud and AI services to overseas Chinese companies such as ByteDance and Shein to help them operate in compliance in overseas markets. Furthermore, the company believes that retaining business in China is still of strategic importance for acquiring Chinese engineering talents. However, analysts question the sustainability of this AI business model: the service relies on third-party models such as OpenAI, and Chinese companies are increasingly using domestic alternatives such as Kimi, which have comparable performance and lower costs.
Microsoft's R&D center in China is also shrinking. Its predecessor, Microsoft Research Asia, has successively set up new laboratories in Vancouver, Singapore, and Tokyo. In 2024, the company provided 1,000 top engineers with job opportunities to transfer to the US and three other countries. Only about one-third accepted, and most senior engineers switched to domestic universities and technology companies. A Microsoft spokesperson responded that the company would continue to be committed to the Chinese market, but did not comment on the details of the specific decision. ByteDance and Shein did not respond to related inquiries.
