Microsoft Modifies Windows 10 for China's Government -- Update

BEIJING -- Microsoft Corp. has finished development of a Windows 10 version customized for Chinese government use, which could boost its China prospects after sales were hit by Beijing's cybersecurity crackdown.

Microsoft declined to say how the software was modified, but in general China's government is concerned about technology products that could contain hidden "backdoors" to enable foreign surveillance.

The Chinese government version of Windows 10 was developed with state-owned company China Electronics Technology Group. Aimed at reopening Microsoft's access to the Chinese state sector, it is another example of how global companies are customizing products to meet heightened security demands from Beijing.

Qualcomm Inc., Intel Corp. and other U.S. technology companies have also struck similar Chinese partnerships. International Business Machines Inc. on Sunday announced a joint venture with Chinese conglomerate Wanda Group to provide cloud-computing services.

U.S. companies must walk a delicate line in these ventures, revealing enough about their technology to reassure Chinese authorities without giving away core intellectual property to partners who could become competitors -- or allow technical changes that would allow the Chinese government to conduct surreptitious surveillance of its own.

Microsoft declined to comment on how it addressed this balancing act.

The software still needs to go through Chinese government review before it can be included on official procurement lists, a Microsoft spokesman said. Xiong Qunli, chairman of CETC, said his company expects the government to greenlight the software.

"We're currently beginning the sales process," Mr. Xiong said.

CETC, which develops technology for Chinese military and civilian use, owns 51% of the joint venture with Microsoft, C&M Information Technology Co. Ltd.

The software has already been tested at three pilot sites, including a China customs office, according to two people familiar with the matter.

China had dropped Microsoft's newer products from government procurement lists following disclosures by former U.S. National Security Agency contractor Edward Snowden about U.S. surveillance in 2013.

Microsoft remains under an antitrust investigation by China's State Administration for Industry and Commerce. Microsoft has long found the China market challenging due to widespread software piracy and China's efforts to promote domestic technology, people familiar with the matter said.

--Eva Dou and Yang Jie

(END) Dow Jones Newswires

March 21, 2017 11:48 ET (15:48 GMT)

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