Microsoft in China: Cozying up to the Government

5 December 2007, 11:04AM

Written by Leo Tallay

Of all the Western information technology (IT) companies present in China, none has better access to the upper echelons of the Chinese government than Microsoft: its Chief Executive Officer (CEO) Bill Gates met with no less than four Government leaders during a four-day trip to China in April 2007. Current Chinese president Hu Jintao, for his part, visited both the Microsoft campus and Gates' home during an official visit to the United States in April 2006. When the Chinese version of the Microsoft Network (MSN) online portal was launched in 2005, it was through a joint venture between MSN and a venture fund named Shanghai Alliance Investment Ltd. (SAIL), led by Jiang Mianheng, son of former Chinese president Jiang Zemin.

The reason for the close relationship is clear: Microsoft has been present in China since 1992, mostly selling software initially, however the company's performance in its first decade there has been poor. Microsoft subsequently decided that its business would benefit from a strong partnership with the Government, the exact opposite of what it does in the West. This is in spite of Microsoft's own guidelines set down in its 2004 Citizenship Report:

For us, compliance means more than complying with laws and regulations that impact our day-to-day business activities. Compliance also means living our values and being accountable to Microsofts Code of Conduct, which govern our business practice around the world.

No profanity on MSN blogs

The MSN Spaces product was launched as part of MSN China in June 2005, and tests carried out by Amnesty International showed that attempts to create blogs with words including 'democracy', 'human rights' and 'freedom of expression' in the title were blocked, producing an error message including the warning: "The title must not contain prohibited language, such as profanity". After first denying it was filtering blog content in any way, Microsoft finally admitted it was responding to directions from the Chinese government. Further tests carried out a year later showed the list of censored words appeared to have changed, however Microsoft never reported the list of all words banned at any particular time, leaving users in the dark and likely to self-censor more than they need to, just to be on the safe side. Further research carried out by Reporters Without Borders (RSF) in 2006 found that the MSN search engine on average returned 78% of results approved by the authorities when a "subversive" keyword was entered to do the search.

Microsoft's self-censorship on MSN Spaces came under the spotlight in late December 2005, when Chinese journalist and blogger Zhao Jing, writing under the pseudonym Michael Anti, had his blog shut down after Chinese authorities requested SAIL do so. Anti's popular blog had been openly critical of the authorities' crackdown against a Beijing tabloid exposing corruption and official abuse. Being hosted on servers located in the US meant that the blog was censored not only in China but globally. Following the outcry, Microsoft announced it would develop a set of standards it would adhere to in the future, such as only removing blogs when receiving formal legal notice from the Chinese Government, and then only in China. However RSF reported on 23 August 2007 that MSN was among the blog service providers that had signed a 'self-discipline pact' to end anonymous blogging, by "encouraging" them to register bloggers' real names and contact information; the pact also says blog content should be monitored and managed. RSF fears that "a new wave of censorship and repression seems imminent" in the lead-up to the next congress of the Chinese Communist Party (CCP) in October 2007.

Reviving its fortunes

Toeing the GovernmentҒs line has produced positive results for Microsoft in China, at least in business terms. The company will not release results for its operations there, but the magazine Fortune estimates China revenue will exceed US$700 million in 2007, about 1.5% of global sales, which is three times what they were in 2004. The trend also shows in the sale of personal computers (PCs) in the country: this year, 24 million PCs will be sold in China, adding to the 120 million already in place. Although the company's China revenues average no more than US$7 for every PC in use (compared with US$100 to US$200 in developed countries), CEO Bill Gates told Fortune those figures will eventually converge. He has also publicly declared that he is certain China will eventually be Microsofts biggest market. Microsoft's way of doing business in China has handsomely paid off, and this clearly points the way to other multinational companies on how to achieve success there, setting a worrying precedent.

Human rights groups are unimpressed. Asia expert Sophie Anderson of Human Rights Watch stated: "I may not have high expectations of [Chinese search company] Baidu as a defender of free speech, but I do of Bill Gates". Microsoft did seem to respond to pressure in January 2007, when it joined Amnesty International in a multi-stakeholder initiative with academics, socially responsible investment firms, other experts and companies, to develop a set of voluntary principles to promote and respect human rights on the internet. Microsoft's actions since then seem clearly at odds with this initiative, however, and also with its own 2003 Citizenship Report, where it claimed that "responsible corporate citizenship is defined by good behaviour, not good intentions."

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After long-term imprisonment for speaking publicly about human rights issues, Wei Jingsheng was finally released with help from Amnesty International.

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