Microsoft retreats in China, but AI boom helps it keep a window open

In the past five years, at least 15 Microsoft branch offices and joint ventures in China have been shut, corporate filings show, and Microsoft is pursuing what five company sources described as a strategy of retreat. | REUTERS

Aug 18, 2026

BEIJING/SHANGHAI – Microsoft once regarded the idea of quitting China as unthinkable. The year was 2010 and Google was about to exit due to concerns over censorship and cyberattacks. That decision was lauded by democracy activists, but not Bill Gates and Microsoft’s then-CEO Steve Ballmer, who suggested Google was overreacting.

In the past five years, however, at least 15 Microsoft branch offices and joint ventures in China have been shut, corporate filings show, and Microsoft is pursuing what five company sources described as a strategy of retreat.

The firm considered quitting the market in 2023 because some executives felt it took on too much geopolitical risk for too little economic return, one of them said, while stressing Microsoft has no current plans to exit. China accounted for just 1.5% of global revenue, Microsoft said in 2024. Microsoft took a major hit from the erosion of trust between Washington and Beijing, the five people said.

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