Microsoft is quietly helping launch an incubator to boost Chinese startups with cutting-edge AI – and the bizarre project is reigniting fears in Washington that the tech giant is getting too cozy with Beijing, The Post has learned.
Last month, local Chinese Communist Party officials stood alongside Microsoft executives when the “Shenzhen Global Expansion Center” was unveiled, touting it as a “one-stop platform for international business expansion.”
The software giant co-founded by Bill Gates will provide local firms with its “AI technologies, platform capabilities, and access to its global ecosystem network,” according to a May 8 press release.
US lawmakers have grown increasingly concerned about Microsoft’s decades-long presence in China, where it has two major AI labs and more than 10,000 employees – all of whom remain under close watch by the CCP.
Aside from its role as the largest software provider to the US government, Microsoft, led by CEO Satya Nadella, is a key player in the winner-takes-all race to develop advanced AI.
A spokesperson for the Republican-led House Select Committee on China, which held a hearing on April 16 on “China’s Campaign to Steal America’s AI Edge,” told The Post that “Microsoft should seriously reconsider the wisdom of helping China’s AI technology efforts.”
Lawmakers are concerned “particularly given the dangers for American national security, and the company’s recent failures outsourcing defense work to China,” a Select Committee spokesperson told The Post.
“It makes no sense that some of the American companies most ruthlessly mistreated by the CCP persist in pursuing futile partnerships in China,” the spokesperson added.
The little-noticed project also could put Microsoft at odds with the Trump administration. Last year, the White House blasted the company for allowing China-based software engineers to maintain Pentagon computer systems and warned as recently as April that China was engaged in “industrial-scale” efforts to rip off AI technology.
Chinese hackers have repeatedly exploited Microsoft systems – most notably in a brazen campaign targeting the emails of then-Commerce Secretary Gina Raimondo in 2023. Last August, War Secretary Pete Hegseth ordered an end to Microsoft’s use of so-called “digital escorts” in China to oversee the Pentagon’s cloud-computing networks, citing spying risks.
Microsoft declined to comment specifically on a detailed list of questions — including a request for clarity on which “AI technologies” were being offered to startups. Instead, a company spokesperson downplayed the project, calling it “a marketing and advertising training initiative and not a research or development center.”
“We do not operate the center directly and it does not conduct AI research, develop technology, or receive government funding,” a Microsoft spokesperson insisted in a statement.
Microsoft launched the expansion center in collaboration with the Chinese advertising tech firm Eclicktech and with support from the “Shenzhen and Luohu district governments,” according to the release.
The May 8 launch event featured appearances by Qi Zhang, the head of Microsoft AI Asia, and Zhu Lin, chief of staff at Microsoft AI Asia Pacific. The center is “focused on supporting emerging industries including digital economy, artificial intelligence, smart hardware, fashion and design, healthcare, and advanced services.”
By opening the center, Microsoft “appears to be aligning itself with a longstanding CCP priority, which is the globalization of high-tech Chinese companies,” according to Isaac Stone Fish, a China expert and CEO of Strategy Risks.
“I can’t speak for why Microsoft made this decision,” Fish said. “I can say that companies like Microsoft that publicly align themselves with the Chinese Communist Party in China face increased regulatory and public relations scrutiny for those moves in the United States. What happens in China doesn’t stay in China.”
Microsoft has long downplayed national security concerns related to its work in China, with company president Brad Smith even going as far as to suggest in a June 2024 congressional hearing that the company was somehow exempt from China’s 2017 law requiring companies to cooperate with the CCP’s intelligence services.
The company insists that it maintains guardrails around sensitive research in China, such as facial recognition and quantum computing. Microsoft has acknowledged it allows China to inspect source code, but claims it does so within a controlled environment “where the code cannot be recorded or extracted.”
Regardless, Microsoft Research Asia, as its local business is known, has become a major talent hub for Chinese startups that are in direct competition with the US tech industry. As The Post exclusively reported last year, several key members of Chinese AI firm DeepSeek’s team got their start as longtime “interns” at Microsoft’s AI labs.
“At a time when Washington is focused on America ‘winning the AI race,’ one of our iconic frontier AI developers is apparently working to help Chinese startups gain overseas market share, including by granting them access to cutting-edge American technology,” said Evan Swarztrauber, a former FCC policy adviser and principal at CorePoint Strategies.
“It demonstrates a complete disconnect between Microsoft’s policy advocacy in Washington, which is wrapped in the American flag, and its actions that prioritize market access in China and its relationship with a US adversary,” Swarztrauber added.
Microsoft has “played both sides for decades” to protect its profits in the region – and those efforts are now backfiring on Americans, according to Joe Grogan, who served a stint as director of the US Domestic Policy Council during Trump’s first term in office.
“They handed Beijing their source code, let Chinese engineers maintain Defense Department computer systems, and planted their largest R&D center outside the U.S. on Chinese soil,” Grogan said. “Now, as China bankrolls anti-AI propaganda to turn Americans against their own technological future, Microsoft is handing Beijing a competitive edge in the AI race.”
