Microsoft’s new joint venture shows that China’s bullying tactics work on US tech firms

Image: Reuters/Pool New
We may earn a commission from links on this page.

In the course of a year and half, Microsoft has gone from being an enemy of the Chinese state to a friend.

The company announced today it will form a joint venture called C&M Technologies with China Electronics Technology Group, a state-owned enterprise that provides IT hardware and software to the Chinese military.

According to a Microsoft blog, the joint venture will act as an exclusive licensor for a government-approved version of Windows 10 that will be distributed to “government and critical infrastructure state owned customers.”

It’s easy to point to the joint venture as evidence of yet another US tech firm cozying up to Beijing in order to access the massive market.

But it’s also true that China’s government needs Microsoft just as much as Microsoft needs China, if not more. Much like your average corporation or small business, having access to a good, secure desktop operating system is critical for the state military. But now there are no politically feasible software options for the country’s state agencies.

Using legal, licensed Windows software is a no-no since Edward Snowden’s revelations showed how the United States government is indeed spying on China’s government. Pirated versions of Windows, meanwhile, are hard to vouch for when it comes to quality and, especially, security.

China has yet to find a graceful way out of this dilemma. It has several homegrown operating systems, such as Neokylin, a Linux-based alternative to Windows XP. But their influence appears to be limited, judging by their continued obscurity. Its best solution is to find a state-affiliated partner for Microsoft that will distribute the software and take responsibility for security. More importantly, this partner firm could access code or additional intellectual property in hopes of weaning itself away from Microsoft in the future.

Curiously, Microsoft has agreed to the joint venture after getting bullied by China. It fell subject to an anti-monopoly probe in July 2014, which came not long after Beijing banned government agencies from using Windows software.

Perhaps the joint venture comes out of mutual desperation. Microsoft desperately needs to revive its enterprise business, and the Chinese government cannot pretend that clunky homegrown operating systems are a substitute for decent software. But if bullying Microsoft was ultimately China’s attempt to get the Redmond-based company to jump the fence, it seems to have worked.