Since the NSA debacle, the Chinese government has been taking a harsh stance on anything technology wise that comes from the United States. The company recently banned Windows 8 on the grounds that the operating system wasn't secure enough, and now the government has banned Microsoft's Office 365 Suite.
According to the Chinese government, the Microsoft Office 365 suite is banned in certain parts of the central government. It is not certain if this will spread across the whole government, or if the ban will ever be lifted. The excuse for the ban is on the grounds of protecting information security, though it could also mean that the Chinese government is paving the way for local software companies to rise up and compete more effectively.
This move is a huge problem for Microsoft, as the Chinese market is huge with over 1 billion citizens. The inability to sell Windows 8 and Office 365 subscription in the market could hurt Microsoft's bottom line, but most likely not by much since the ban on these products are currently on a government level. Should the ban be handed down to the public at large, then Microsoft would have reasons to worry.
Strangely enough though, Microsoft is claiming the Office 365 ban is lacking merit.
Due to the sensitivity of the issue, a senior Microsoft executive, who requested anonymity, told China Daily that they "have contacted the Ministry of Finance, the governing body of government procurement projects. They had no idea of the ruling as well."
We understand Office 365 is still available for sale on the Central Government Procurement Center's website, but at the rate things are going, it is difficult to tell what the government plans to do next. Furthermore, we also understand that Adobe and Oracle are also in for a world of hurt from the Chinese.
Since the revelations of the NSA and the United States military accusing five Chinese nationals of cyber espionage, the government has made great strides to do away with U.S. made IT products. In our eyes, there's nothing much Microsoft can do stop the Chinese government from making these changes. Right now, it is in the hands of the United States government.