China has long been both a huge lure and a thorn in the side for Microsoft. Massive piracy of Windows XP, a decade-long effort to replace Windows entirely with a home-grown Linux variant called Red Flag and an OpenOffice variant called RedOffice, and a ban on Windows 8 following the leak by former NSA contractor Edward Snowden of information on National Security Agency spying all have combined to hinder Microsoft in the Chinese market.

But now Microsoft—in partnership with the state-owned China Electronics Technology Group (CETC)—is preparing to reboot its relationship with Beijing, thanks to a modified version of Windows produced specifically for China, Dow Jones Newswires reports.
CETC, which develops technology for the Chinese government and military, owns a 51 percent stake in a joint venture with Microsoft called C&M Information Technology Co. Ltd.

The new operating system created by the venture is in testing at three government pilot sites; Xiong Qunli, chairman of CETC, told Dow Jones’ Eva Dou and Yang Jie that the venture was “beginning the sales process” with the Chinese government.
The Chinese government, like the US government, has been permitted source code review for security purposes in a secured lab at Microsoft’s China Information Technology Security Certification Center in Beijing since 2003.

But the Snowden revelations provided the Chinese government with ammunition to punish US technology companies and develop their domestic companies’ capabilities.

The joint ownership arrangement allows Microsoft to potentially bypass the ban on many US technology products in China.
IBM has followed the same route through a partnership with Wanda Group—a deal announced on March 19.
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