Microsoft Opens Technology Center in Guangzhou

UNCLAS SECTION 01 OF 02 GUANGZHOU 015379

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TAGS: ECON ETRD EINV EDUC TNGD CH
SUBJECT: Microsoft Opens Technology Center in Guangzhou


(U) This document is sensitive but unclassified. Please
protect accordingly.


1. (SBU) Summary: Following on the heels of President Hu
Jintao's meeting with Bill Gates in Seattle, Microsoft
unveiled its first technology center in South China. The
center is the result of an agreement between Microsoft and
the Chinese government to set up at least 10 such centers
throughout China. The center will develop software for e-
governance, entertainment, and information systems security
as well as provide training and consulting services to local
government offices and enterprises. The facility will
eventually employ between 300 and 500 software engineers,
though staff said they will be lucky to find 100 qualified
candidates by the end of 2006. End summary.

Microsoft Makes a Deal
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2. (SBU) Timothy Chen, corporate vice president and CEO of
the Greater China region, was the ranking Microsoft
representative at the ceremony on May 15. In an aside to
Consul General, Chen said he served as the interpreter
during President Hu Jintao's April 2006 visit to Bill Gates'
Seattle home. The opening ceremony of the Guangzhou
Technology Center was reportedly postponed until Hu returned
from his visit to Seattle.


3. (U) In his remarks, Chen said Microsoft and the Chinese
government signed their first MOU in June 2002. Since then,
Microsoft has provided training support to more than 30,000
Chinese students and professionals free of charge. In
addition, Microsoft has outsourced USD 5.5 million worth of
software products to Chinese partners. Microsoft and the
Chinese government signed their second MOU on Apr. 18, 2006
during Hu's visit to Seattle. Under this agreement,
Microsoft will establish more than 10 technology centers in
key cities in China to promote the advancement of
information technology through cooperation with local
software developers.

And Now to Fill the Buildings...
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4. (SBU) Microsoft's Guangdong research center is the first
such center for Microsoft in South China, and others are
planned for Shenzhen and Xiamen. The center is located in
Gaotang Software Park, on the fringes of the city in the
fast-developing Tianhe District. It occupies two mid-size
buildings that are connected by an elevated pedestrian
walkway and surrounded by grassy fields -- a miniature
version of the Seattle campus. According to company
literature, the center's long-term goal is to employ between
300 and 500 software engineers. However, Microsoft
representatives said informally that they would be lucky to
find 100 qualified employees by the end of 2006 because of
the dearth of well trained, experienced professionals in the
field.


5. (U) According to company literature, the center will
provide services in software design, development, and
support in the areas of e-governance, information security,
and digital entertainment. It will also provide training
and consulting services for government agencies and
enterprises, with the aim of developing Guangzhou's software
industry.

Big Plans for Guangzhou's Software Industry
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6. (U) Guangzhou Vice Mayor Shen Bonian noted in his remarks
that Guangzhou is experiencing a shortage of high-tech
talent, but said the city's 11th Five-Year Plan calls for
more than 200,000 software technicians by 2010. He said the
Microsoft technology center will help nurture this much-
needed talent and also assist in the informatization of
Guangzhou government offices and enterprises. Guangzhou's
software industry is expected to generate more than 100
billion RMB (USD 12.5 billion) in income by 2010, with an
annual increase of 35 percent. In comparison, software
companies in Gaotang Software Park generated 10.5 billion
RMB (USD 1.3 billion) of revenue from software sales in

2005.

Comment: A Political Necessity Hobbled by Educational
Deficiencies
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GUANGZHOU 00015379 002 OF 002



7. (SBU) This technology center, being the result of
negotiations between Microsoft and the Chinese government,
may serve Guangzhou's interests more than Microsoft's,
though Microsoft sees the centers as being a political
necessity for its future in China. Though software
localization and customer service are important for
Microsoft's regional operations, the employment, training,
and consulting services that this center will provide are a
boon to Guangzhou's high-tech industry. The remarks by
Microsoft staff that the center's job openings will be
difficult to fill reflect the deficit of well-trained,
experienced professionals in Guangzhou's high-tech industry.
Other contacts in the high-tech field have complained to us
that young Chinese software developers have sufficient
technical ability, but lack the talent to innovate -- owing
in part to outdated teaching methods in China's
universities.

DONG