Has Apple Run Into Troubled Waters In China?

Chinese ministry pulls the plug on some key Content Delivery nodes critical to Apple.

The tug-of-war between China and the United States has been simmering for years now. Both of them being the leading global powers have been at each other’s throats multiple times before, mostly over political issues.

It doesn’t end at just bureaucratic jostling. The tug-of-war is often aimed at the bigger corporations; ask Google and Microsoft, and now Apple Inc.

Apple is the one in the crosshairs of the Chinese government this time around. iTunes’ Books and Movie stores were ordered to shut down in China a couple of days ago that too, only six months after they were allowed in the Chinese market. There’s no clear reason for the orders received from the ministry responsible for media and publications, however it is seems that the government felt that these avenues could weaken the Chinese government’s plenipotentiary control over the availability and dissemination of information transmitted via these avenues.

It will undoubtedly be a blow to Apple’s revenues from the region, with China being the second largest market in terms of revenue for Apple; however it may not cause a big dent. Apple has plenty more, more lucrative revenue sources in China.

Daniel H. Rosen of Rhodium Group, a firm specializing in the Chinese economy, however has another interpretation. As he shared with The New York Times, “The decision to block Apple’s stores appears to be motivated by China’s desire to promote local tech firms and throttle the efforts of foreign entities in its market.”

This is not the first time for such an issue between Apple and the Chinese government. The company has faced many challenges in making its devices as well as services available in the region. While the devices were only allowed in a few years ago, iTunes was only allowed in as recently as September 2015. Apple Pay was recently established in association with a Chinese brand called UnionPay, after much negotiation.

Prior issues with Apple

Apple was forced to concede that Chinese customer’s iCloud data reside on state-controlled servers in China, rather than on Apple’s own servers as they do for the rest of the world.
Consequently, starting August, 2014, China Telecom’s servers are the only servers that hold Apple’s iCloud in China now.
This move was reportedly made at the behest that the government wanted to keep the Chinese data within the country, for its privacy and national security reasons.

Then, in 2015, the Chinese government mandate the execution of exhaustive network safety evaluations on all Apple devices entering the country. This included the entire range of Apple products like iPhone, iPad, and Mac being imported into the country via commercial channels.
The issue of concern for the Chinese government then was that the Apple operating system might hold within itself, a backdoor for the US authorities such as the NSA that could be used for unwanted surveillance within the country.
Tim Cook, Apple’s CEO, had been personally involved in the negotiations with the Chinese government since December 2014. He had been directly negotiating with China’s Director of Internet and Information, Lu Wei.
Director Wei, reportedly stated that China recognized that it is one of the biggest markets for a megabrand like Apple, and in the light of a global economy they were willing to open their markets for such brands. A spokesperson also present at the last meeting reported that Cook also agreed to cooperate entirely with the Chinese government.

Issues with American Companies

As we said earlier, this is not the first time an American company is running into major hurdles at the behest of policies in China. Over the years, a lot of American IT and Internet companies have faced the same fate, like Google and Facebook. Both of whom have been banned in China at times and have then had to negotiate their way around the sanctions, just to remain in the market. Facebook, still remains banned in China, ever since July 2009!

Microsoft has been another company that has been under the radar of the Chinese government. The officials of the company, and especially the CEO Satya Nadela, have been trying to work with the government and the authorities but without clear, long lasting success.
In January this year, the company faced backlash in the form of a severe scrutiny of its software, with every bit of code being put under a scanner by the Chinese authorities to ensure that the software does not have any backdoors for the US authorities.
And that’s not the only challenge.
Though products like Windows and Office are widely used in the country by the public, most software are pirated versions and the company faces even more challenges after the newly established scrutiny and protocols.

China’s Policy Now and Further

Reportedly, right after the iTunes ban was announced, Xi Jinping, the President of the country, held a meeting with leaders of various tech companies, regarding China’s stringent Internet policies. “China must improve management of cyberspace, and work to ensure high-quality content with positive voices, creating a healthy, positive culture, that is a source for good,” said the President, according to a report as told to the New York Times by a Chinese state-run news service Xinhua.

One can only surmise, that these steps are in some ways measures of self-protection in the wake of the Snowden leaks.

Snowden, along with WikiLeaks, had a couple of years ago, uncovered and made public a list of ways that the U.S. government used for surveillance domestically and internationally. This list also perpetrated that certain corporates (like IBM, Microsoft, Cisco, Qualcomm, and … Apple) aided the government in such surveil.

Since then, the country has been unwelcoming, if not hostile to these corporations, as well as the ones they suspect of any similar agenda.

The End Word — Or the Lack of One

Already known for its inescapable stranglehold on the information flowing in or out of the country, the Chinese government couches and enforces this control via stringent policies governing personal privacy and security; and uses such policies at its unilateral discretion.

Yet, the issues of concern that China raises with American companies are always different, unique and curious. But one thing is for certain — any time an American company starts making it big in China, Beijing pushes back. This is in the form of political backlashes, market bans, new and more stringent rules, and much more. Sometimes there is only so much the companies can fight or push back.

Apple might try to resolve this particular issue but there doesn’t seem to be any immediate hope apparent right now. In a statement, Apple stated that they “shall try to bring the iTunes services back to the region”, but it did not detail any steps and more tellingly, a timeline by when that would happen.

Originally published at Chip-Monks.