American Companies' Role in China under Scrutiny

Microsoft president and vice-chairman Brad Smith issued a cautionary message at the Web Summit conference in Lisbon, Portugal, warning the West against assuming China is lagging behind in technological development.

In a recent interview with CNBC, Smith stated that "in many ways," China is closing the gap or has even surpassed Western nations in various technological areas. His comments came amid uncertainty surrounding the US presidential transition and its potential impact on trade and technology transfers with China.

Smith acknowledged that Microsoft's operations in China are subject to approval from both Chinese and US governments, with certain areas like data centers for foreign companies experiencing relatively high levels of acceptance. However, consumer services face significant restrictions.

"The truth is, as an American technology company, we can do business in China only when we are offering a service that the Chinese government wants to have there, and the U.S. government wants us to bring there," Smith said. "And in some cases, they look at data centers to support international brands like Mercedes or Siemens or Starbucks or General Motors — there seems to be a level of comfort. In consumer services, not really."

Microsoft has maintained its presence in China since 1992 and operates its largest R&D center outside the US. Despite Microsoft CEO Satya Nadella stating that the company isn't focused on China as a domestic market, it continues to provide services to Chinese companies and has a more visible presence than many other US tech giants.

The comments from Smith highlight the complexities of doing business in China and the need for American companies to carefully navigate the country's regulatory landscape.