Microsoft sells OpenAI models in China. OpenAI and Anthropic won’t.

Last updated: August 22, 2026

Openai Models

Microsoft has quietly become the primary channel for OpenAI models in China, supplying GPT technology to ByteDance, Ant Group, Meituan, and Tencent through Azure — even as OpenAI and Anthropic refuse direct sales over IP and misuse concerns. Azure's China AI revenue roughly tripled in the year to June 2025 after a 400% jump the prior year, making Microsoft the only U.S. vendor bridging American AI labs and Chinese tech giants.

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The scale is not trivial. ByteDance has been Microsoft’s largest AI customer in recent years, running largely on OpenAI models, and is on track to spend more than US$1 billion a year on Microsoft’s AI and cloud services, people familiar with the matter told Bloomberg. Ant Group, Meituan and Tencent also buy AI models through Azure, though Ant says it develops its own models and that its core products do not rely on outside systems.

Inside Microsoft, the growth has been celebrated rather than played down. Azure’s AI revenue in China expanded faster than in any other sales territory, roughly tripling in the financial year to June 2025 after climbing about 400% the year before, then-chief commercial officer Judson Althoff told staff at a July 2025 sales meeting, according to a transcript reviewed by Bloomberg. 

Althoff described Microsoft as the one company “bringing those two places together,” meaning the AI hubs of the US West Coast and China’s east. President Brad Smith has separately told US lawmakers that the China business accounted for roughly 1.5% of the company’s revenue in 2024.

Why OpenAI models in China run through Microsoft alone

The reason comes down to Microsoft’s singular contract with OpenAI, which lets it set its own terms for selling GPT models abroad. Both OpenAI and Anthropic have declined to sell into China directly, and Anthropic’s models are absent from Microsoft’s China line-up altogether. That leaves Microsoft acting as the intermediary for models whose makers have decided the Chinese market is too risky to serve.

Risk is the recurring tension. OpenAI has privately pressed Microsoft to do more to stop Chinese customers from “distilling” its models, Bloomberg reported, a technique that uses one model’s outputs to train another. Microsoft points to automated monitoring and a rule that it sells only to established companies rather than individual developers. 

Yet sources told Bloomberg that Chinese buyers face no heightened scrutiny, and synthetic data generated from the models is difficult to police. To limit its exposure, Microsoft does not host the OpenAI models on Chinese soil; customers reach them over the internet from data centres elsewhere, Singapore among them.

The contradiction sharpens when you look at what Microsoft hosts alongside GPT. It added DeepSeek’s R1 to Azure AI Foundry in January 2025, and this month confirmed to Axios that it is testing a fine-tuned, Azure-hosted version of DeepSeek-V4 as a cheaper option for Copilot Cowork, the enterprise agent currently powered by OpenAI and Anthropic models. So Microsoft is selling a Chinese model into Western businesses while selling American models into Chinese ones, taking the margin on both legs of the trade.

Whether the balancing act survives the politics is another matter. The China business is contentious in Washington, where lawmakers have cast the country’s AI push as a threat to American industry, and OpenAI’s private objections could grow louder. For now, Microsoft owns the market for OpenAI models in China, and it is the only player being paid by both sides.

See also: China’s DeepSeek V3.2 AI model achieves frontier performance on a fraction of the computing budget

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Source: Original Article

For more on this, see OpenAI ends Microsoft legal peril over its $50B Amazon deal.

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