The American tech giant revealed last week that a hockey group called Hafnium was taking advantage of Microsoft Exchange and was able to access computers. The company said the group is “considered to be state-backed and operating out of China.”
A U.S. official recently told CNN that up to 250,000 Microsoft customers were hit by the attack, and the White House is considered an “active threat.” Beijing has pushed back on allegations that it is involved, warning last week that linking such attacks “directly to the government” is a “highly sensible political issue” that should be based on “unprepared estimates.”
Microsoft joined China in 1992 and for decades has relied on its highly influential lab – Microsoft Research Lab Asia – to help build influence. Its software is used by Chinese government and companies, and Bing is the only foreign search engine with any draw in China.
Experts say, however, that the company survived the US-China trade war and other tensions. And even as Washington is expected to investigate the incident further, it looks like Microsoft will be pushing ahead with plans to build its presence in China.
The company has just hired a new CEO for Greater China, Hou Yang. And they have announced plans to double their cloud service capacity in the country in the coming years.
“Microsoft not only has a history in China, but a longer history of engaging in state-related cyber threats,” said Peter Singer, strategist and senior at New America Foundation with knowledge of cybersecurity and foreign policy.
Construction building
Microsoft has done a great job build goodwill in China. His Beijing-based research laboratory has cultivated many Chinese tech talents, including Byhangance founder Zhang Yiming. Alibaba (BABA) tech chief Wang Jian and former Baidu (BIDU) president Zhang Yaqin.
Billionaire co-founder Bill Gates has visited China more than a dozen times since the 1990s, and was even hosting Chinese Vice President Hu Jintao at his home in Washington state.
Chinese Foreign Minister Wang Yi praised the former CEO as an “old friend of the Chinese people” in 2018, and President Xi Jinping wrote to Gates last year to thank him for his support in ‘fight Covid-19.
The success of the company has led to success. It employs over 6,000 people there, and its results are still available where others are not. While Facebook (FB) blocked, for example, Microsoft ‘s LinkedIn remains one of the few Western social media tools available on the mainland. Bing’s search engine also works, though Google (GOOGL) has been cut out for years.
Challenges in China
The company faces challenges in China, however.
President Brad Smith said last year that Microsoft will receive less than 2% of global sales from China – a sum that will amount to about $ 2 billion based on Figures 2019.
Some have blamed the lack of sales on piracy: In 2018, former CEO Steve Ballmer told Fox Business Network that most Chinese companies use Microsoft’s operating system, although hardly any companies are paying for it. Ballmer, who left Microsoft in 2014, estimated that piracy cost the company approximately $ 10 billion in profit.
Allegations of piracy have long been debated in China, including a push back from the Chinese government. One well-known government scientist, Ni Guangnan with the Chinese Academy of Engineering, even once said in an interview with Chinese state media that Microsoft “deliberately” allowed the use of pirated products to prevent operating systems local the draw.
Microsoft has also met with tensions with Chinese authorities. In 2014, controllers announced an antitrust probe into the company’s Windows software system and raided offices. No punishment was ever announced, however.
Despite these setbacks, Microsoft has continued to focus on expansion. They will try to grow their cloud business in China, the second largest market in the world after the United States, by enhancing the capability of its Chinese version of Microsoft Azure. She partnered with a local Chinese company in 2014 to bring cloud computing to China.
Microsoft said this month that it wants its new regional CEO to “seize high growth opportunities” in Greater China by building partnerships in technology and elsewhere.
“Microsoft still seems to be expanding in China, including collaboration on data management and cloud cybersecurity,” said Winston Ma, a consortium professor at New York University who was managing director at China Investment Corp., a Chinese sovereign wealth fund.
– Alex Marquardt, Zachary Cohen, and CNN bureau in Beijing contributed to this report.
