Flip the perception: In China, US govt doesn't have MS levels of access to info, potentially including protected user data & non-public hosting /admin data.
Even if that's not the case, being in China avoids (most?) NSA choke points.
Thanks for the clarification, that makes more sense.
Personally, I would think microsoft would be easier to "motivate" to share given they probably have more investments in china which could be used as leverage.
See also: skype.
Not just because they don't want Chinese code stored on foreign servers, but because they want it on servers they have easy access to.
Even if this is far-fetched, it's not about what we think, but the risk China perceives.