MICROSOFT Corp will tighten cost controls globally due to a deteriorating macro-economic environment, but it still plans to invest more on R&D and outsource more business to China, said Zhang Yaqin, Microsoft's corporate vice president and chairman of Microsoft China.

In China, Microsoft's R&D and outsourcing budget will both grow in "double-digits" this year, Zhang said in an interview on Tuesday night in Shenzhen, Guangdong Province.

Microsoft previously said it would invest US$100 million annually on research and development in China from 2006. Meanwhile, the firm in January said it will outsource a total of US$100 million in business to China within the next five years.

"It's a tough time for all industry players (due to the United States credit crisis) worldwide, including Microsoft, but we will continue to expand in China," Zhang said during the interview after the China Business Leaders Awards 2008, which was held in Shenzhen.

In 2006, Microsoft had a research team of 500 people and now it has 3,000 people in its R&D team. Zhang said the company needs more talent in the search, service and mobile platforms.

Globally, Microsoft has reported US$15.1 billion in revenue for its fiscal first quarter ended on September 30, up 9 percent from a year ago.

"Microsoft's 20-year effort to expand beyond PC client software now allows it to balance weaknesses in some areas with strengths in others (such as service business)," said Dwight Davis, analyst at consulting firm Ovum.

Meanwhile, Microsoft will launch a flexible price strategy in China, following the "black screen" issue with pirate software, Zhang said. The company will provide more products with "regional pricing" in China, Zhang noted, without giving details.

This year Microsoft has slashed the price of its entry-level Windows and Office products to 199 yuan (US$31), less than half the previous price.