China orders early removal of Windows from state agencies

China's Ministry of State Security has instructed government-affiliated organizations to uninstall a customized version of Microsoft ↘ 0.58% Windows 10 from their computers, accelerating a planned phase-out by several months, Bloomberg News reported on Tuesday.straitstimes

The directive targets a version of Windows 10 developed by C&M Information Technologies, a joint venture between Microsoft and state-owned China Electronics Technology Group Corp., which was founded in 2016 to make Windows compliant with Beijing's cybersecurity requirements. CMIT had originally planned to retire the software in February 2027, but the new order moves that timeline forward amid what sources described as growing data-security concerns.stocktwits+1

Microsoft's Response

"Microsoft is not aware of a security incident affecting this product, which continues to receive regular security updates," a company spokesperson told Bloomberg. The directive came as a surprise to some state agency employees, according to people familiar with the matter, arriving just weeks before a planned meeting between President Donald Trump and Chinese leader Xi Jinping.straitstimes

Chinese software stocks jumped on the news, with Hunan Kylinsec Technology and Archermind Technology surging by the daily limit of 20 percent, while China National Software & Service Co climbed 10 percent.straitstimes

A Broader Push for Tech Independence

The move is part of Beijing's years-long campaign to replace foreign technology in sensitive government systems. Chinese firms including Kylin Software and Tongxin Software have developed domestic operating systems as alternatives to Windows, and authorities have ordered central government agencies to swap out foreign-branded PCs. In July procurement for central government portable computers, all winning bid packages featured domestic operating systems, with Windows 10 CMIT Government Edition no longer listed as an option.tradingkey+1

The shift extends beyond software. China is increasingly relying on domestic chipmakers such as Huawei Technologies and Cambricon Technologies as U.S. restrictions limit access to advanced Nvidia ↘ 1.21% AI accelerators.stocktwits

Limited Financial Impact, Symbolic Weight

The direct financial impact on Microsoft appears contained. The company disclosed in 2024 that China accounted for just 1.5 percent of its global revenue. However, China remains strategically important: Microsoft has built a business selling AI and cloud services to major Chinese firms, with ByteDance alone on track to spend more than $1 billion annually on Microsoft's AI and cloud offerings, according to Bloomberg.japantimes+1

Over the past five years, Microsoft has closed at least 15 branch offices and joint ventures in China and seriously considered exiting the market entirely in 2023, according to the Japan Times, which cited five company sources describing a strategy of retreat. The company's role in China is now shifting from serving the local market to supporting Chinese enterprises expanding overseas.japantimes