When I worked in Shanghai a few years ago, Microsoft was setting up a big shop in Shanghai. However, it pertained to software development and not as much as trying to set up a marketing/distribution organization.
However, this is a common practice with organizations trying to enter the Chinese market. They may choose to establish a part of the business that employs Chinese resources to demonstrate what a good employer and organization they are. They can use that further themselves in the Chinese market. Financial institutions are another example of this practice.
Many companies trying to enter the PRC will encounter and expect losses when entering this market. But with this market size, a company like Microsoft will not be easily deterred from leaving. In spite of the govt. support for Linux, there will still be plenty of $ for MS. And I have seen policies like this change over time.
I am not going to repeat the intellectual property issues that have already been discussed. Suffice to say I could purchase any CD/DVD I wanted for the equivalent of $1 or $2 US.
This is a very brief summary but this discussion could take much longer.