Microsoft’s Roots in China Have Positioned It to Buy TikTok

Alumni of the software giant’s Beijing research lab are now executives at Alibaba, Tencent, SenseTime—and TikTok parent ByteDance.
bill gates and xi jinping
Former Microsoft CEO Bill Gates with Chinese president Xi Jinping. Gates established Microsoft's Beijing research lab in 1998.Getty: Tyrone Siu/AFP/Getty Images

In 1998, China was hardly a technological rival to the US. With only 7 million internet users, fewer than 26 million personal computers, and an ecommerce industry that generated a paltry $42 million the following year, it was considered a laggard compared with many other countries.

But Microsoft, then the world’s richest and most powerful tech company, recognized the potential.

That year, CEO Bill Gates created Microsoft Research China, an engineering outpost in Beijing to tap into a pool of talent and establish ties to the country’s tech scene. In the following years, Microsoft launched internet operations in China when other US tech companies were stymied.

Now, Microsoft’s history of bridging the divide between East and West may prove key in its potential acquisition of TikTok as the US and Chinese governments square off over the future of the wildly popular social video app.

Microsoft confirmed its interest in buying TikTok in a statement on Sunday. President Trump said this week that such a deal could go ahead, after previously suggesting the app might be banned outright. His administration claims that TikTok could funnel data back to the Chinese government or possibly influence US public opinion on command.

The deal talks place Microsoft at the center of a widening fissure between the two increasingly hostile superpowers, potentially threatening the access to China that Microsoft has spent decades cultivating. Peter Navarro, a White House trade adviser who is a harsh critic of China, has suggested that the company may need to divest its China operations in order for the deal to work. Microsoft declined to comment.

The idea of a forced TikTok sale has met with severe criticism in China, but Microsoft may be unique in its ability to navigate the situation. “I don't think that the Chinese government will be upset with Microsoft if the TikTok deal goes ahead,” says Anupam Chander, a professor at Georgetown University who studies China.

The fruits of Microsoft’s presence in China are visible across the country’s tech industry, with alumni in prominent positions at many major tech companies. At TikTok’s parent company, ByteDance, CEO Zhang Yiming worked as an engineer for Microsoft between 2008 and 2009. Hongjiang Zhang, head of the ByteDance Technical Strategy Research Center, was a founding member of Microsoft Research Asia.

Elsewhere, the CTO of Alibaba, Wang Jian, was an early member of Microsoft Research Asia. The director of Tencent’s AI lab, Dong Yu, worked at Microsoft for more than a decade before leaving in 2017. Xu Li, cofounder and CEO of SenseTime, a prominent Chinese AI startup, also came through Microsoft Research Asia, as did Yin Qi, founder and CEO of Megvii, another AI company. Searches on LinkedIn show many other ex-Microsoft people in prominent positions at those companies and others.

Microsoft Research Asia “is considered the West Point for Chinese premium tech talent,” says Nina Xiang, founder of China Money Network and the author of a 2019 book on Chinese AI companies.

Unlike most US internet companies, Microsoft has found ways to operate in China. In 2009, a year before Google left the country in protest over censorship and alleged government hacking, Microsoft launched a Chinese version of its search engine, Bing, in compliance with Chinese censorship rules. Microsoft also acquired LinkedIn, the business-focused social network, in 2016, two years after the company introduced its platform—also censored—in China. Bing and LinkedIn are relatively small players in China, but they are rare examples of successful adaptation.

The founding head of Microsoft’s Beijing lab was Kai-Fu Lee, an expert on natural language understanding who had held vice president roles at Apple and Silicon Graphics. Lee, who now runs Sinovation Ventures, an investment firm focused on artificial intelligence, is a prominent voice on China’s tech scene and the author of AI Superpowers, a recent book about the country’s rising prowess in AI.

Lee declined to comment for this story. In a 2018 interview with WIRED, Lee said that Microsoft Research Asia played an important role in seeding China’s AI industry. “It was the most powerful company on earth, and Bill Gates was the richest person in the world and the number one idol in China,” Lee said. He noted that the founders of several Chinese AI companies focusing on facial recognition came through the lab. “We didn’t at the time know when the AI revolution would come, but we knew it was the next big thing,” he says.

Microsoft also benefited from the relationship. Besides paving the way for its business operations in China, the lab produced cutting-edge results.

One project shows how new ideas in AI traveled between the US and China through the lab. Li Deng, previously a researcher at Microsoft’s lab in Redmond and now the chief AI officer at the hedge fund Citadel, recalls a demonstration of research done with Geoff Hinton, a professor at the University of Toronto and one of the fathers of modern AI, to Microsoft Research Asia in 2010.

This led to the creation of a real-time English-to-Mandarin translation system that was demonstrated by Rick Rashid, then Microsoft’s chief research officer, in 2012. Similar technology is now part of Microsoft’s video chat platform Skype.

Li says Microsoft Research Asia helped raise the standard of Chinese computer science and fostered collaboration between the US and China that has helped advance the field of AI overall.

Other alumni of Microsoft Research Asia have gone on to prominent roles within the company. For example, Harry Shum, who helped found the lab with Lee, later became executive vice president of artificial intelligence and research at Microsoft.

This May, as tensions rose between the US and China, Microsoft celebrated the Asia Research group’s history. It highlighted several interns who have gone on to become professors at leading Chinese universities, and others who have become full-time researchers at the company.

Such pan-Pacific collaboration may become increasingly difficult. Some Trump administration officials believe the US and China are locked in a battle for global supremacy through technology. TikTok’s rise also reflects another government worry about the commercial heft of Chinese companies. TikTok and its Chinese counterpart, Douyin, were the world’s most downloaded and highest grossing apps in July, according to SensorTower, an analyst firm. ByteDance reportedly surpassed Baidu and Tencent in terms of digital ad revenue in the first half of last year. The company is currently valued at more than $100 billion on private trading markets.

Georgetown’s Chander speculates that China could retaliate for the forced sale of TikTok by limiting sales of Microsoft’s Windows operating system and Office software to certain Chinese entities. “We've made ourselves unreliable business partners,” he says of the administration's strategy.

The bigger fallout may be the way Chinese and American companies are forced to rethink plans to do business across the Pacific. “The Chinese tech world is in shock and will grapple with the implications of such a deal for a long time,” says Xiang of China Money Network. “They will redraw their overseas expansion strategy.”

That’s a far cry from the cooperation Gates foresaw in 2004, not long after Microsoft first ventured into China. “People should pay attention to China,” he said. “It is a phenomenon in every respect.”

Tom Simonite contributed reporting.

Updated, 8-6-20, 2:15 pm ET: An earlier version of this article incorrectly said Dong Yu worked at Microsoft Research Asia.


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