Microsoft exec worries new China regulations will hurt Azure

Azure launched in beta in 2013 in China, where it now has 50,000 customers

The Microsoft logo, outside an office in Beijing.

The Microsoft logo, outside an office in Beijing.

Microsoft's Azure cloud computing service has been growing fast in China, but a company executive has warned that the government's changing tech policies could slow its momentum.

Authorities here have been crafting new regulations, and the government's position on tech "can change at any time," Gary Sun, president of Microsoft's Asia-Pacific Technology subsidiary, told reporters in Beijing. "I think that's the uncertainty for all businesses here," he said.

Azure has about 50,000 customers in China, where it was launched in beta in 2013. Many clients are multinationals such as Coca-Cola, though local startups also use the services.

Due to Chinese regulations, Microsoft has had to partner with a local company, 21Vianet, to offer its cloud services, because data must be kept in data centers located inside the country.

Foreign companies have complained about the regulations, arguing that the restrictions make it too costly to offer data and Internet services in China.

In addition, the country is drafting new policies, including an anti-terror law, that may tighten regulations further and require foreign tech companies to provide encryption keys for their software.

Large Chinese companies are still trying to understand the benefits of cloud computing, Sun said. In some cases, government policy will influence the services they buy.

"If it's a government agency, or the SOEs [state-owned enterprises], they are all kind of looking at what the government wants" before making choices, he said.

Microsoft is a growing player in China's enterprise cloud computing market, but it faces competition from local companies such as Alibaba Group, which is the market leader, according to analysts.

Microsoft has already attracted regulatory scrutiny in China. Last year, the country's State Administration for Industry and Commerce opened an anti-monopoly investigation against the company over its Windows and Office software.

Still, Microsoft remains committed to China and to growing its presence in the market, even though the stricter government policies could hamper its business, Sun said.

"We believe that with what we are doing, we can build trust with the government," he said. "And in return, that will help us in the long-run."

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