Why Microsoft Sells OpenAI Models in China While OpenAI and Anthropic Refuse

Microsoft has quietly positioned itself as the primary supplier of OpenAI models in China, selling the technology to the country's largest internet companies — even as OpenAI and Anthropic continue to withhold their own models from the Chinese market over intellectual-property and misuse concerns.

The arrangement, detailed this week by Bloomberg, gives Microsoft a position no other American AI vendor currently holds: it sells the GPT series to Chinese firms that the model's own creator refuses to deal with directly.

📌 ByteDance is on track to spend more than US$1 billion a year on Microsoft's AI and cloud services — making it Microsoft's largest AI customer in recent years.

The scale is significant. ByteDance has been running largely on OpenAI models via Microsoft Azure, and sources familiar with the matter told Bloomberg it is on pace to exceed the billion-dollar annual threshold. Ant Group, Meituan, and Tencent also purchase AI models through Azure, though Ant Group states it develops its own models and that its core products do not rely on external systems.

📈 Azure AI Revenue in China: Explosive Growth

Inside Microsoft, the China AI business has been celebrated openly. According to a transcript of a July 2025 internal sales meeting reviewed by Bloomberg, then-chief commercial officer Judson Althoff told staff that Azure's AI revenue in China had:

• 🔥 Roughly tripled in the financial year ending June 2025
• 🔥 Previously surged approximately 400% the year before
• 🔥 Expanded faster than any other Microsoft sales territory globally

Althoff described Microsoft as the one company "bringing those two places together" — referring to the AI hubs of the US West Coast and China's east coast. Separately, President Brad Smith told US lawmakers that the China business accounted for roughly 1.5% of Microsoft's total revenue in 2024.

🤔 Why OpenAI Models in China Flow Only Through Microsoft

The key lies in Microsoft's exclusive contract with OpenAI, which permits Microsoft to set its own terms for reselling GPT models internationally. Both OpenAI and Anthropic have declined to operate directly in China. Notably, Anthropic's models are entirely absent from Microsoft's China product line, leaving Microsoft as the sole intermediary for models whose creators consider the Chinese market too high-risk to serve.

⚠️ Key Risk: OpenAI has privately pressed Microsoft to do more to prevent Chinese customers from "distilling" its models — a technique that uses one model's outputs to train a competing model.

Microsoft says it relies on automated monitoring and restricts sales to established companies rather than individual developers. However, sources told Bloomberg that Chinese buyers face no heightened scrutiny, and synthetic data generated from the models remains difficult to police.

To limit its legal and geopolitical exposure, Microsoft does not host OpenAI models on Chinese soil. Customers access them via the internet from data centres located elsewhere — including Singapore.

🤝 Microsoft Plays Both Sides: DeepSeek Meets GPT

The contradiction becomes sharper when examining what else Microsoft hosts on Azure. In January 2025, Microsoft added DeepSeek's R1 model to Azure AI Foundry. This month, it confirmed to Axios that it is testing a fine-tuned, Azure-hosted version of DeepSeek-V4 as a lower-cost alternative for Copilot Cowork — an enterprise agent currently powered by OpenAI and Anthropic models.

In short: Microsoft is selling a Chinese AI model into Western businesses while simultaneously selling American AI models into Chinese ones — collecting margin on both ends of the trade.

💡 Bottom Line: Microsoft currently holds a monopoly on OpenAI model sales in China — and is the only company being paid by both sides of the US–China AI divide.

🏛️ Political Risks Loom Over the Balancing Act

Whether this arrangement survives Washington's scrutiny remains uncertain. The China business is increasingly contentious among US lawmakers, who have framed China's AI advancement as a direct threat to American technological leadership. OpenAI's private objections to Microsoft's China sales practices could also intensify over time.

For now, Microsoft owns the OpenAI model market in China — a position that is both commercially lucrative and geopolitically precarious.