The Real Reason China Banned Microsoft’s Windows 8

Why did China just ban Microsoft’s Windows 8 on all government computers?

May 22, 2014 at 11:16AM

China recently banned the use of Microsoft's (NASDAQ:MSFT) Windows 8 on government computers, striking a critical blow against the tech titan's efforts to grow its footprint in the second largest economy in the world.


Source: Microsoft.

Windows 8 and 8.1 machines currently account for 12% of the world's desktop operating systems, according to Net Market Share, putting it behind Windows 7, at 49%, and even Windows XP, which still controls 26% of the market.

According to China's Central Government Procurement Center, the government banned the installation of Windows 8 on government computers as part of a notice regarding the use of energy-saving products. State-run news agency Xinhua reported that the ban was to ensure computer security after Microsoft ended support for Windows XP last month.

Those two explanations make little, if any sense -- how does keeping Windows 8/8.1 off government computers save energy or ensure security?

What's really going on here?
The ban comes at a time when tensions between the China and U.S. are running high. On May 19, the U.S. accused Chinese government officials of hacking into several companies to steal trade secrets. China called the allegations hypocritical and claimed that the U.S. engaged in the same practices.

Microsoft has also had a rocky relationship with China. In 2011, former CEO Steve Ballmer stated that revenue from China was only equivalent to 5% of U.S. sales due to piracy, although total PC sales in both countries were roughly the same. Although the Chinese government vowed to stiffen up its anti-piracy laws, it also suggested that Microsoft lower the price of Windows to reduce piracy.

But neither security issues nor piracy explains why China would suddenly ban Windows 8. The true answer, in my opinion, has to do with Windows XP.

Escaping Microsoft's clutches
Over a course of 13 years, Windows XP became the most popular operating system in the country. According to research firm Canalys, XP now accounts for 50% of China's desktop market. When Microsoft stopped supporting Windows XP last month, half of China's computers were either forced to upgrade or left defenseless against malicious attacks.

It might be simple for individuals to upgrade their home systems, but it's certainly not as easy for governments. Both the Dutch and U.K. governments have struck multimillion-dollar deals with Microsoft to extend support for XP -- indicating how difficult and costly it is to upgrade systems across government agencies.

With those government deals and the Operation Clandestine Fox patch, Microsoft has shown that it certainly has the resources to continue supporting Windows XP. It's just not willing to do so anymore, since it hopes that taking the aging system off life support will force users to upgrade.

That wouldn't be a problem if Microsoft held its ground. Instead, striking special deals with governments paints a different picture -- that Microsoft will keep supporting government computers, for the right price. China's government is now faced with two choices -- to either pay Microsoft for extended support or upgrade its systems to Windows 8. The first choice delays the inevitable, and the second one just starts the whole cycle over again. When Microsoft pulls the plug on Windows 8, China will be stuck in the same position.

A growing superpower needs its own OS
What China really wants is a government operating system that it can control. China's been down this road before -- its state-sponsored company, Red Flag Software, launched Red Flag Linux in 2001.


Red Flag Linux. Source:

China believed that Red Flag could kill two birds with one stone -- addressing the problem with pirated copies of Windows while laying out the groundwork for its own national operating system. In 2008, the government gave Internet cafes running pirated copies of Windows an ultimatum -- buy legitimate versions of Windows or install Red Flag Linux. However, the effort never gained enough traction, and it completely fell apart in February after Red Flag Software shut down due to unpaid wages.

Although Red Flag is officially dead, China's Ministry of Industry and Information Technology has been working with U.K.-based Linux vendor Canonical on releasing a follow-up distro to Red Flag known as Kylin.

Does this mean the end of Windows in China?
Despite efforts like Red Flag and Kylin, Windows will remain the dominant OS in China for the foreseeable future. Too many Chinese businesses -- including its $13.5 billion online gaming industry -- are dependent on Windows. In addition, most Linux distros require a basic knowledge of terminal and repository commands, which make it much less appealing than the "double-click to install" setup that Windows users are accustomed to.

China obviously knows that it would be unreasonable to push Microsoft out of the country. However, upgrading its own government systems to Kylin instead of Windows 8 would be a feasible goal. Linux is also a more sensible OS for government agencies, since it is generally less vulnerable to malicious hacks.

Microsoft has stated that it "will continue to provide Windows 7 to government customers," according to a statement issued to The Verge. Yet I believe that China isn't any more interested in Windows 7 than Windows 8 -- it simply wants to replace XP with an operating system of its own.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recent recruited a secret-development Dream Team to guarantee their newest smart device was kept hidden from the public for as long as possible. But the secret is out...and some early viewers are even claiming its everyday impact could trump the iPod, iPhone, AND the iPad. In fact, ABI Research predicts 485 million of these type of devices will be sold per year. But one small company makes this gadget possible. And their stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Leo Sun has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information