The Windows 8 China Test

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There is a great deal of coverage of the China’s huge telecom manufacturing firm Huawei  after it received a  bipartisan sanction  from the  US  House Intelligence Committee. But according to diverse sources such as The Economist there is reason for the concern that goes beyond the hidden ownership and connection to the Chinese military including  its espionage group. Huawei has been subject of   a number of  Business IP espionage and stealing cases:

MIT Technology Review -Why the United States Is So Afraid of Huawei
The Economist – Huawei: the company that spooked the world
ThreatPost – Did Nortels demise result from Huawei espionage?

More broadly China in general is seen as a growing  espionage threat to US  and World Businesses as seen at Bloomberg and the Register.

Now China has emerged as the second largest economy in the World displacing Germany and then Japan in the past 3 years. China has huge export surpluses helped along by a currency tied artificially to the US dollar. China has displaced countries like Mexico, Vietnam, the Phillipines, and others as the lowest cost manufacturing operation. In sum, China’s plea that it is a developing country and so its lax efforts on controlling its World Trade Organization violations is unfortunate but  acceptable  no longer holds water. So there has to be some good faith tests of Chinese continually amended promises of controlling espionage, counterfeiting and outright pirating.

The Windows 8 China Test

With a new top level  Chinese administration coming to power in November of this year, there will be several tests of Chinese complaince with WTO trade agreements and just playing fair in economic markets. One of the most important involves Chinese pirating of foreign and notably US software. Both Microsoft and the anlyst firm IDC estimate that between 40 and 80% of Windows OS software is not just pirated but resold in China.  Windows 7 is avoided in China because of its enhanced security associated with update features. So 60% of Windows in China is XP and IE6. This means there will be pent up demand for upgrades to better Windows, IE and other  software.

And Microsoft is obliging. It will be selling its Windows 8 software in China. It will also be selling through a key  Chinese  distributor its Surface tablet with Windows 8. this will be an opportunity for Chinese users both government corporate and individuals to get a legitimate copy of Windows 8 and on a very serviceable tablet.  So a good test of Chinese good faith on controlling piracy will occur at the end of 2012 and and in the first quarter of 2013 when Microsoft reports the legitimate versus pirated sales of Windows 8 and associated software. At this point, US companies will have one marker on how safe it is to do business in China.  As well it will be an indicator of how safe it is to buy key strategic Chinese equipment like that of Huawei.

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