Cloudwood

Explained in original forecast. MSFT unlikely to close the lab vs. downgrade it, due to a desire not to damage their interests in China, which is a significant market for them.  At this point, lab closure probability becomes a discounted version of the Taiwan invasion/blockade probability before Dec 31 -- which itself is unlikely until after the US election and only somewhat less unlikely in 2025.

The question revolves around whether Trump wins the Presidency and weakens or eliminates a perceived US willingness to defend Taiwan, as well as China's domestic economic situation. Neither of these will be sufficiently resolved by Feb 2025, suggesting China will still be in prep mode for a blockade or invasion at most by the target end date for the question. 

Examining the PRC's takeover of Tibet, territorial disputes with India, PRC's claims in the South China Sea and other conflicts, PRC's military actions over claimed territory have historically been a unique mixture of caution and aggression. The caution is particularly aimed at preventing danger to or destabilization of China proper as well as maintaining the PRC's domestic and international reputation. In the latter case, careful calibration of coercive actions with an eye toward minimizing the potential for embarrassment and maximizing the opportunities to declare victory even in negative circumstances (cf Vietnam invasion in 70s) seems to be the pattern. In short, nowhere in PRC history do we find a case of the PRC gambling what it already has (a certain stable control over China proper and a certain reputation as a hard target against foreign enemies) in order to gain additional territory/concessions. While China's actions against the Philippines in the South China Sea has helped the US to mobilize a Pacific alliance, the direct consequences against China (in actual loss of territory or domestic unrest or economic consequences in the form of directly attributable trade actions or sanctions) have been muted and its actions have been carefully calibrated not to trigger wider consequences (notwithstanding that the calibration may in the end prove flawed).

We should look for a similar approach of escalating and calibrated action designed to minimize consequences (granting that both the actions and the consequences will still be far greater than any so far seen in the South China Sea). Before proceeding with Taiwan, PLA leaders would seek to establish overwhelming PLA forces against an insufficiently defended target, easily manageable military threats to China proper, domestic support and relative domestic stability, signals that the international consequences will be muted and, ideally, some major distraction elsewhere in the world, plus the ability to cloak the effort as legitimate and a last resort after failed diplomacy.  

 If we run through these conditions, we can see that many are not met, although the election of Donald Trump could change that assessment. Overwhelming force: with a promised involvement of US and allies in a Taiwan defense, China must question whether it even has an equal force to its opposition. If Trump who may be less willing to defend Taiwan and who may dissolve or weaken US alliances in the Pacific is elected, this may sooner or later move closer to a "met" condition--but not in 6 months.

A similar calculus applies to an assessment of dangers to China proper. Remember that when China invaded, for example, Vietnam in the 70s it sought a diplomatic greenlight (ironically from the US)  and then sent the bulk of its forces to the Soviet border to protect against Soviet retribution. before moving on what ultimately was an incursion into Vietnam.  In the case of Taiwan, with a strong US led alliance able to defend Taiwan and the possibility of their attacking the China mainland, China will be reluctant to proceed. A Trump presidency again may change the calculus here.  

Domestic Stability: With the current economic crisis this must also be seen as questionable for at least the next 12 months. 

Signals that the international response will be muted: currently, quite the opposite. With a Trump election, that may change.

International Distraction: A full blown war in the Middle East, an escalation of the Ukraine War or some other major crisis, a resumption of violent domestic unrest in the US, etc. could provide the necessary cover. None of these exist yet and their timing is difficult to predict.

In short, there is potential upside in waiting for the outcome of the US Presidential election--the status of key conditions may improve as Trump offers a possible perfect storm of chaos and self-interest that may keep the US out of the conflict and unable to rally a global response. Even if Trump is not elected, China will need to look for some means to arrange conditions more in their favor, with regard to their particular approach and concerns.

I think the odds are preponderant that MSFT will slow down or stop major new investment in its lab, and slow down or stop new hiring, under pressure from the US govt.  Jobs listings for its Research Lab - Asia are mostly based in other Asian countries, with only one junior role open in China. I think the odds are around even (unpredictable) that it will begin to cut roles in the lab this year.  For a variety of reasons, including its relationship with the Chinese government and its almost 2% of revenue from China and the penetration of its search engine in China, not to mention maintaining access to China's AI research(ers), and following a similar pattern of other US corporations, it would not seek to draw attention or create drama around "a closing" -- better to fade away than to suddenly die, in this case.  The US Govt is unlikely to force it to close given them impact on its China business (per above) but may force various measures that would reduce the lab's activity.