China Merchants Group’s securities arm pulls out of tender offer for Microsoft AI services amid rising sensitivity

The securities arm of state-owned conglomerate China Merchants Group (CMG) has scrapped its participation in a tender for artificial intelligence (AI) services provided by US tech giant Microsoft, according to a Monday post on the group’s website, highlighting the growing sensitivity for Chinese firms of sharing domestic data with foreign firms.

Shenzhen-based Merchants Securities, the securities arm of CMG, said in the notice that it had scrapped an offer to procure Microsoft’s large language model (LLM) services, citing a “change of procurement needs”, without elaborating on the changes or if it was seeking to buy the services from Microsoft’s US or China entity.

Merchants Securities did not immediately respond to a request for comment and calls to the company went unanswered as of late Tuesday.

The move comes amid increased rivalry between the US and China over the development of generative-AI technology and Beijing’s tighter grip on sensitive information, such as personal financial accounts and industrial intelligence. Chinese authorities have recently stepped up their scrutiny of the access foreign firms have to potentially sensitive information, a development that has disrupted the operations of some.

Beijing has raided the offices of several foreign consultancies this year, including Capvision and Mintz, while the staff of Bain & Co were questioned in Shanghai, over concerns that they have hired industry experts who may have shared sensitive information, including state secrets and industrial intelligence, according to state broadcaster CCTV and various local media reports.