I base my conclusion strictly on patent applications and granted patents. First, I searched the database of the U.S. Patent and Trademark Office for Microsoft patent applications where at least one inventor was based in China. The number was 1,173. The total number of patent applications Microsoft has on file is 18,085. So Chinese-based research contributes to roughly 6.5 percent of the company's patent applications.
A bit more searching let me refine the results over time. The earliest Microsoft patent applications with an inventor in China came in 2001. Since 2005, Microsoft has had 13,020 total patent applications, of which 908, or 7 percent, include inventors in China. Since 2008, Microsoft has filed 2507 patent applications, 206, or 8.2 percent, had inventors in China. I didn't go into 2009, as it takes upwards of 18 months for patent applications to become public and show up in the database.
I then looked at granted patents for which Microsoft filed the application since January 1, 2001; there were 9,936. Over the same period, about 5.7 percent, or 571, had inventors in China. Since 2005, 262 of the 4,022 patents granted to Microsoft, or about 6.5 percent, had inventors in China.
For Microsoft, China has clearly become a serious location for research -- which may partially explain why the company has said that it's fine with Bing operating in the country, even as Google (GOOG) has tried to make its "standoff" with Chinese authorities a positive PR move. Bing may have little search share in China, but Microsoft has some significant reasons to keep the locals happy.
Image composite by Erik Sherman.