China's scrutiny of influential Western companies competing for a slice of its vast market has weighted down on Apple in an unprecedented manner. Compared to the likes of Google, which pulled its services out of the country
or Qualcomm, which endured government probes and a hefty fine
, the iPhone maker's Chinese operations enjoyed a "white gloves" treatment – until now. The State Administration of Press, Publication, Radio, Film and Television shut down Apple's iBooks Store and iTunes Movie in the country last week. According to informed sources, the regulator excercised its authority and demanded the procedure, despite the government's formal approval of Apple launching its services six months ago.
If the Chinese government strengthens its grip further, it could seriously hinder Cupertino's attempts at securing the country's consumer electronics, content services, and mobile payments markets. China is the second largest market space for Apple, following the United States. The company is practically reliant on it for growth, as the Western market saturation manifests in slower than usual iPhone sales. The iPhone is Apple's best-selling and most profitable product, and anything that can stand in the way of its performance in key markets is of danger to the company. Moreover, app sales and services also serve as strong revenue generators for Apple, and the current development in China is most unwelcome for its business efforts.
Apple's flagship retail store in Beijing.
Advisor Daniel H. Rosen who specializes in Chinese economy explains the move with the government's policies of regulating the foreign content that citizens are exposed to, prioritizing its national security and domestic industries, and giving incentives to local technological giants Huawei, Alibaba, and Tencent. It is widely known that the Chinese government keeps close watch of eight American companies that it considers overly dominant in China's core industries, such as energy, communications, education, and defense. Since regulation increased over the eight companies, one of which is Apple, other American corporations like Cisco, IBM, Microsoft, and Qualcomm have experienced sales slowdown, unexpected raids, agency probes, fines, and pressure to conduct their business in ways that favor government agenda.
Apple issued a statement saying it hopes to bring back its services to Chinese customers as soon as possible. In typical fashion, it declined to comment the situation any further.
source: NY Times