China Decode: Microsoft's China Retreat, Remembering Zhu Rongji, and Typhoon Dolphin's Aftermath

**SPEAKER_1** (0:01)
Support for the show comes from Odoo. Running a business shouldn't feel like surviving a software group project. One app for accounting, another for inventory, another for sales, and somehow, none of them talk to each other. That's where Odoo comes in. An all-in-one business management software that brings every part of your business together, from sales and accounting, to inventory and marketing, all in one powerful platform. No messy integrations, no bouncing between tabs. Best of all, no spreadsheets. Stop managing software and start managing business with one unified system.
Try for free today at odoo.com/profg. That's odoo.com/profg.

**SPEAKER_2** (0:43)
Recommendations can be amazing.
I mean, maybe someone recommended that TV show you've been obsessed with lately. But when it comes to home projects, it's different. If you don't like a show, you might lose a few minutes.
If you hire a friend of a friend of a friend to fix a leaky ceiling, you could end up with a flooded kitchen.
Maybe I know a guy just isn't enough for your home. That's why Thumbtack works so well. They'll match you with a top rated local pro, and you can see photos of past work, credentials, and reviews all right in the app. For your next home project, try Thumbtack. Hire the right pro today.

**SPEAKER_3** (1:22)
You know that feeling when too many things fall through the cracks?
monday.com was built for that gap. The AI work platform where people and agents work side by side to deliver more together. Create your first Monday agent today at monday.com.

**James Kynge** (1:37)
Bill Gates famously saying that more than 90 percent of personal computers in China were running Microsoft software. But what he didn't say was that that was almost all pirated. Microsoft has, in my view, it's been a bit of a loser, certainly in comparison to some of the other companies.

**Alice Han** (2:02)
Welcome to China Decode. I'm Alice Han.

**James Kynge** (2:05)
And I'm James King.

**Alice Han** (2:06)
In today's episode of China Decode, we're discussing Microsoft quietly easing out of China, the legacy of Zhu Rongji, China's Thatcher, and how world Chinese emergency infrastructure works in the midst of a massive typhoon. That's all coming up. But first, let's do a quick check in with how the Chinese markets are starting the week. On Monday, markets were up, with the Shanghai Composite up 1.41% and the Shenzhen Component up 2.44%.
The Chinese government also released key data from the first half of 2026, which showed retail sales growing just 0.6% year on year, missing the target of 1.5%.
The urban unemployment rate was 5.2% in July up from 5% in June. All right, let's get into it. Over the past five years, Microsoft has been steadily shifting its strategy away from China, retreating across multiple fronts. That includes at least 15 branch offices and joint ventures closing, all authorized physical retail stores on the mainland shuddering in 2024, and an estimated 2,000 job losses due to the winding down of Microsoft, Microsoft's original joint venture in mainland China that dates back to 2002 With the withdrawal, however, a small but important sliver of Microsoft remains in China. Now, that's the ability to sell Azure Cloud and AI services to Chinese companies like ByteDance and Shein that need Western technology to manage their international operations. James, I have to say that when I was reading up about the history of Microsoft in China, it took me back to, there's a picture of Bill Gates in 1994 going to China for the first time and meeting with Zhang Zemin. And it's a timely, I think, episode to be talking about this trip because today is Zhang Zemin's centenary, so 100 years since his birth. There was a big fanfare to do about it, led by Xi Jinping and the Communist Party, to celebrate Zhang's victories. And I mentioned this story because if I think back to that period in time in the 90s, it seemed to a lot of American companies that China was the golden goose. If you could just get into the market, then the sky's the limit in terms of market size, in terms of growth potential.
Now, we have Microsoft shutting down, basically, it's all physical operations in China. But I think that the Reuters article and the coverage of it has been somewhat deceptive because although, yes, Microsoft has basically gotten rid of its footprint in China, as well as in terms of hardware supply chain in China. Think about Xbox and other electronics goods. They are still selling to Chinese companies, no? I mean, effectively, the Azure part of the operations in Microsoft is still being used to help Chinese companies like ByteDance and Tencent access US models, right? I think I read somewhere that Tencent is the biggest buyer of these cloud services and uses it to train deploying Western AI models. So I think it's somewhat deceptive to say that Microsoft is completely given up on China, but certainly this retreat is again another casualty in terms of the Western companies that thought that China would be the golden goose.