Microsoft has come under the spotlight amid rising geopolitical tensions between Beijing and Washington, as U.S. lawmakers questioned the company over its ties to China. Microsoft President Brad Smith disclosed that China only accounted for around 1.5% 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 during congressional testimony over computer hacks last year that were linked to China. The hearings, where Smith had to assure lawmakers that U.S. national security was being protected as part of its involvement in China's tech development, show how growing bilateral tensions are impacting American businesses. The tensions are “likely to continue for a long time, which will be hugely negative for U.S. 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. He 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 recent 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 U.S. will benefit from cooperating with each other rather than being in a conflict.”
Despite opting to stay in China, Microsoft has been reducing its China-based engineering team, offering to relocate 700 to 800 employees, the Global Times reports.
