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The retreat
Winding down Microsoft's original joint venture in mainland China, which dates back to 2002, cost an estimated 2,000 jobs.
What remains
What remains is the ability to sell Azure cloud and AI services to Chinese companies like ByteDance and Tencent. They need Western technology to manage their international operations, including handling consumer data and following global regulations overseas, and Azure's data centers give them access to US AI models. Chinese companies have to have a global footprint, and more data needs to be localized, so Microsoft still has something to sell.
Research labs
Microsoft Research China, an AI lab, has also drawn many luminaries of the Chinese AI space. Alumni of the lab are now senior leaders at SenseTime and DeepSeek. Microsoft has opened labs in Vancouver, Singapore, and Tokyo as well.
Why does data localization matter to cloud providers?
China's Cybersecurity Law of 2017 and Data Security Law of 2021 set rules on where certain data is stored and when it can leave the country. Europe's General Data Protection Regulation, in force since 2018, sets separate rules for the personal data of people in the EU. A company operating in several regions has to satisfy each regime at once, which is why it values cloud providers with data centers in many places.
How did Microsoft's Beijing lab shape AI research?
Microsoft founded its Beijing research lab in 1998 as Microsoft Research China, and it was later renamed Microsoft Research Asia. In 2015, researchers there including Kaiming He and Jian Sun published the ResNet architecture, a way of training much deeper neural networks. The paper won the best paper award at the 2016 computer vision conference CVPR.
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