"BEIJING -- Microsoft is asking hundreds of employees in its China-based cloud-computing and artificial-intelligence operations to consider transferring outside the country, as the U.S. tech behemoth finds itself caught in the crosshairs of escalating Washington-Beijing tensions.
Such staff, mostly engineers with Chinese nationality, were recently offered the opportunity to transfer to countries including the U.S., Ireland, Australia and New Zealand, people familiar with the matter said. About 700 to 800 people were given the offer, the bulk of which are involved in machine learning and other cloud-computing tasks, one of the people said.
The offers to move were made earlier this week and employees have until early June to make up their minds, a separate person familiar with the matter said. Workers can choose to stay in China, too. Staff were informed the relocation would help bolster Microsoft's global ambitions in cloud computing and meet needs for AI engineers in a variety of places, the person said.
The proposal comes as the Biden administration seeks to put tighter curbs around Beijing's capability to develop state-of-the-art AI -- a crackdown that carries the potential to touch U.S. companies with operations in China.
After cutting China off from advanced-chip purchases and equipment, the White House is considering new rules that would require Microsoft and other U.S. cloud-computing companies, which sell access to advanced AI computing power, to get licenses for Chinese customers.
Microsoft's suggestion of worker relocation also illustrates the spillover from an expanding tech race between the world's two largest economies, in which companies from both countries have often risked accruing collateral damage.
A Microsoft spokeswoman acknowledged the company had shared an optional internal transfer opportunity with an unidentified subset of employees, and said it remains committed to the region and China. She declined to comment on the reason behind the relocation offer.
The migration of Microsoft's China-based staff elsewhere does carry indirect risk for China's AI aspirations, especially given the global scarcity of top engineering talent, industry analysts said. Stationed overseas, the Microsoft engineers would likely see the prospects of returning home to work at a Chinese employer as less enticing, they said.
For decades, the Redmond, Wash.-based tech juggernaut has stood out among U.S. tech companies for its large footprint and close relationship with China. Unlike the block placed on Alphabet's Google, Microsoft's Bing search engine has maintained services in China. While U.S. internet and social-media offerings such as X and Meta Platforms' Facebook aren't available there, Microsoft still has a massive user base for its Windows operating system and Microsoft Office programs.
Its research lab, Microsoft Research Asia, opened more than two decades ago and has large offices in Beijing and Shanghai. It is widely credited with cultivating some of China's brightest AI and tech leaders.
Many of the lab's former engineers have left for prominent roles in China's biggest tech firms such as TikTok parent ByteDance and Baidu.
When China first opened its borders after a yearslong closure because of Covid-19, Microsoft founder Bill Gates was among the first foreign business magnates that President Xi Jinping hosted.
Over the years, Microsoft, whose offerings range from business software to videogames, has also built up a sizable research-and-development team in China focused on cloud computing and AI.
Microsoft employs about 7,000 engineers at its Asia-Pacific R&D Group, with most of them based in China. Many participate in the company's global research and development for its core products, including AI, an area where Microsoft has pledged to spend billions of dollars to build out globally. The worldwide effort could give Microsoft an edge in a rapidly growing AI industry, where it faces fierce competition from Google and Meta.
Microsoft has invested about $13 billion in the maker of ChatGPT, OpenAI, and launched an AI assistant of its own called "Copilot." Neither OpenAI's chatbot nor Copilot tools are available in China.
China, which is among the first countries globally to draft rules regulating generative AI technology, requires large-language models that could influence public opinion to go through a strict vetting process. No models made by foreign developers have been approved yet, and it couldn't be determined whether any have sought government approval.
Microsoft's China connections have come under scrutiny in Washington over the past year, as bipartisan support grows to re-examine certain types of economic ties with Beijing.
At a Senate subcommittee hearing on AI last September, Microsoft President Brad Smith was asked how much the company had invested in AI development in China and queried about the Communist Party membership among its local staff. The U.S. executive said then that Microsoft was careful to make sure the company didn't run afoul of U.S. export controls and regulations.
The tech giant also faces growing headwinds in China. Last year, Microsoft scrapped InCareer, its China-focused jobs app, which was introduced after shutting down LinkedIn's social network there in 2021. Market demand for Microsoft's products is likely to weaken as China builds homegrown alternatives and weans itself off Western technology, industry analysts said.
Rising U.S.-China tensions were named the top business challenge U.S. companies operating in China faced, for the fourth year running, according to a survey released by the American Chamber of Commerce in China in April." [1]
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1. Microsoft Asks Staff In China to Relocate As U.S. Strains Rise. Huang, Raffaele; Kubota, Yoko. Wall Street Journal, Eastern edition; New York, N.Y.. 17 May 2024: A.1.
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