Microsoft Azure China offers Chinese businesses a loophole to OpenAI’s departure

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Customers can use OpenAI through Azure China, at least for now

China struggles to advance in AI
(Image credit: Shutterstock)

Although OpenAI is technically cutting off China and businesses are scrambling to find an alternative, they may not need to do so. According to a report on The Information, Microsoft has confirmed there is a loophole allowing access to OpenAI’s models using its Azure cloud service.

When OpenAI made its surprise announcement that it would leave the Chinese market effective July 9, companies reliant on the generative and conversational AI models began searching for alternatives. OpenAI had officially prohibited the use of its technology for some time, but developers used VPN services to mask that they were in China and access the models.

After OpenAI announced it would cut off access even to those using VPNs, local Chinese companies began trying to fill the void. Tech companies like Tencent, Baidu, and Alibaba started moving into the market with “migration” plans and discounts. Zhipu, a Chinese large language model (LLM) firm, announced an offer that included training, consulting services, and tokens similar to those used by developers to access OpenAI’s API.

It turns out these alternatives may not be truly necessary yet, thanks to a Microsoft service. Microsoft Azure China, operated as a joint venture with local tech firm 21Vianet, continues to offer OpenAI models. The day after OpenAI announced it would crack down on access to its models from Chinese customers, Microsoft China used its official WeChat account to encourage developers to move their work over to Azure OpenAI.

Microsoft contracts with OpenAI to provide the startup’s LLM and other models. Under the terms of the agreement OpenAI has with Microsoft, it gets 20% of any revenue Microsoft generates through selling OpenAI services. Three Azure China customers confirmed to The Information that they still have access to OpenAI’s models.

Of course, Microsoft’s Azure OpenAI offerings will likely intensify scrutiny of the company by U.S. officials. The U.S. government hopes to cut China off from advanced U.S. technology like AI altogether, fearing China might use artificial intelligence to boost its military capabilities. That’s led to tough questioning of Microsoft by such bodies as the House Homeland Security Committee.

The U.S. government’s national security concerns have recently led to a bipartisan bill to try to make it easier to block U.S. companies from selling AI to China. If that bill is signed into law, it’s difficult to say how much longer even Microsoft will be able to keep providing OpenAI services to customers in China.

Jeff Butts
Jeff Butts
Contributing Writer

Jeff Butts has been covering tech news for more than a decade, and his IT experience predates the internet. Yes, he remembers when 9600 baud was “fast.” He especially enjoys covering DIY and Maker topics, along with anything on the bleeding edge of technology.

27 Comments Comment from the forums
  • MacZ24
    If you sanction China, it will force them to pull through and they will become stronger that way.

    If you want to contain them, cutting them off completely is the second worst thing you could do.

    They have the brain power, they have the research base, they have the industrial base and access to raw materials.

    As for the military angle, I find it dubious. Even if they were supplied Nvidia or AMD IA GPUs without restriction, what confidence could they have that these were not tempered with in any way ? For military or sensitive subjects, I would prefer having my own reliable hardware and software than relying on what an adversary provides, even if it is less efficient or more costly.
    Reply
  • nookoool
    Seems like only foreign firms in China would bother to invest heavily into using western API at this rate.
    Reply
  • JamesJones44
    MacZ24 said:
    If you sanction China, it will force them to pull through and they will become stronger that way.

    If you want to contain them, cutting them off completely is the second worst thing you could do.

    They have the brain power, they have the research base, they have the industrial base and access to raw materials.

    As for the military angle, I find it dubious. Even if they were supplied Nvidia or AMD IA GPUs without restriction, what confidence could they have that these were not tempered with in any way ? For military or sensitive subjects, I would prefer having my own reliable hardware and software than relying on what an adversary provides, even if it is less efficient or more costly.
    I remember similar comments from the Soviets back in the day. Only time will tell if these things actually pan out for one side or the other.
    Reply
  • MacZ24
    JamesJones44 said:
    I remember similar comments from the Soviets back in the day. Only time will tell if these things actually pan out for one side or the other.

    The USSR & satellites had a dysfunctionnal economic system. That was well studied. I remember the lines forming outside the soviets shops we saw on our TVs at the time, because the system was not working very well.

    I don't think you can expect a repeat in a country that in 30 years lifted hundreds of millions of people of poverty and is mostly using capitalistic methods.

    Also, the USSR was mostly isolated, while the sheer number of countries flocking to BRICS indicates quite the opposite.
    Reply
  • FoxtrotMichael-1
    JamesJones44 said:
    I remember similar comments from the Soviets back in the day. Only time will tell if these things actually pan out for one side or the other.
    MacZ24 said:
    The USSR & satellites had a dysfunctionnal economic system. That was well studied. I remember the lines forming outside the soviets shops we saw on ours TVs at the time, because the system was not working very well.

    I don't think you can expect a repeat in a country that in 30 years lifted hundreds of millions of people of poverty and is mostly using capitalistic methods.

    Also, the USSR was mostly isolated, while the sheer number of countries flocking to BRICS indicate quite the opposite.
    This is a really interesting discussion. While I agree it's difficult to compare China to the old Soviet Union for a number of reasons (better access to materials, a more mature industrial base outside of military, etc.), it isn't exactly true that the Chinese economic system isn't dysfunctional. At this point the Chinese government is essentially trying to put one fire out after another, which becomes common in centrally controlled economies. Frequently they have to sacrifice in one area (or future capacity in one area) to prevent collapse in another. It's a game of whack-a-mole that they can't really ever win and at this point China is simply delaying the inevitable collapse due to their demographic problem. They have one of the oldest workforces in the world, an abysmal birth rate, and a consumer base that's rapidly drying up (remember, consumption is primarily driven by young families).

    To say that countries are "flocking" to BRICS is also a bit misleading. To date, there has never been a single example of a country who managed to salvage their economy after being cut off by the West. Time will tell if China can rise to meet the many challenges they are currently facing.
    Reply
  • MacZ24
    FoxtrotMichael-1 said:
    To say that countries are "flocking" to BRICS is also a bit misleading. To date, there has never been a single example of a country who managed to salvage their economy after being cut off by the West. Time will tell if China can rise to meet the many challenges they are currently facing.

    BRICS is half the population of the world.

    It is 32% of World GDP while the G7 is 30% (2023 numbers). Their share is increasing while ours is declining. And PPP for them is much lower.

    So yes, you absolutely can believe what you want.

    You can sanction the rest of the world and see what happens (right now there are 2.3 billion people under sanctions).

    When I see the political systems in the US or Europe, it is quite clear to me (and to much of the rest of the world), who is declining.
    Reply
  • FoxtrotMichael-1
    MacZ24 said:
    When I see the political systems in the US or Europe, it is quite clear to me (and to much of the rest of the world), who is declining.
    "Declining" is an interesting word choice when the birthrate of China is 1 .16 while in the US it is 1.66 (as of 2021). Both countries, sadly, are in decline, but the US is declining less than China at this point. Nobody is going to be able to outrun the numbers and you need births or immigration to create economic consumption - that's just a cold, hard, fact.
    Reply
  • MacZ24
    FoxtrotMichael-1 said:
    "Declining" is an interesting word choice when the birthrate of China is 1 .16 while in the US it is 1.66 (as of 2021). Both countries, sadly, are in decline, but the US is declining less than China at this point. Nobody is going to be able to outrun the numbers and you need births or immigration to create economic consumption - that's just a cold, hard, fact.

    Cold hard fact :

    Even at 1.16, China's young population is still far bigger than the US total population, which is also declining and becoming older. And europe birth rates are also catastrophic.

    And China has access to half the population of the world as client. Nobody will buy the american EVs protected by 100% tariffs. They will all buy the chinese ones, far cheaper, while the American auto industry will stagnate because it cannot compete.

    It's like all the western media clamoring that China is collapsing because it has only 5% growth, while the US, to achieve 3% for once, has to have a deficit of 7% GDP. In peacetime and while not in recession.

    Do you wonder why Gold and Bitcoin are that high ? I don't.
    Reply
  • FoxtrotMichael-1
    MacZ24 said:
    Even at 1.16, China's young population is still far bigger than the US total population, which is also declining.
    You do know how time works, right? For how long will the young, consumer class in China be larger than the US without it being replaced? 10 years? 20 years? I doubt it. The larger "young" workforce in China will not be replenished even at the poor rate it's being replenished in the West. Like I keep saying, we will see. It's not as if the West doesn't have its' own struggles.
    Reply
  • MacZ24
    FoxtrotMichael-1 said:
    You do know how time works, right? For how long will the young, consumer class in China be larger than the US without it being replaced? 10 years? 20 years? I doubt it. The larger "young" workforce in China will not be replenished even at the poor rate it's being replenished in the West. Like I keep saying, we will see. It's not as if the West doesn't have its' own struggles.

    You can use Population simulator to see that in 40 years, China has still a population over 1 billion.

    And I pretty much doubt that things will stay the same and that the west, well before that, will have stopped to matter that much.
    Reply