Apple signed a $275 billion deal with China in 2016 to circumvent regulations that would hurt its profits from selling devices and services in the country. The information was published in a report last week on the website The Information, which had access to internal documents from big tech.
The deal would have been closed when Tim Cook, Apple’s chief executive, visited China to try to reverse a series of regulatory actions against the company. According to the report, the Chinese dictatorship argued at the time that Apple was not contributing enough to the local economy.
The pledge was signed with a Chinese government agency. In exchange for legal exemptions, Apple has pledged to invest in building new stores, research and development centers and renewable energy projects, in addition to using more Chinese components in its devices, signing agreements with Chinese software companies, establishing partnerships with universities in the country and invest directly in local technology companies – in the same year, Apple announced a US$ 1 billion investment in Didi Chuxing, a competitor of Uber (interestingly, this year the Chinese dictatorship ordered big tech to withdraw the application from Didi from the local App Store for alleged illegal collection of user data).
According to information from the New York Times, Apple gets a fifth of its total revenue in China. A report in the American newspaper published in May had already shown that the link between Apple and the Chinese regime would involve serious ethical dilemmas. While the company is pro-free speech and civil rights, two data centers in Guizhou and Inner Mongolia store personal user data on servers run by a Chinese state-owned company.
Also according to the New York Times, Apple gave up the encryption technology it used in other markets after China did not allow its use in the country. In addition to possibly jeopardizing the privacy and security of its Chinese customers’ data, big tech also removes apps from the App Store that dislike Beijing.
Apple did not comment on the The Information story. At the time of The New York Times report, the company claimed that it has never compromised the security “of users or their data in China or anywhere” where it operates and that it uses its most advanced encryption technology in the country. Regarding the removal of apps, Apple said it only does so to comply with Chinese law.
In an analysis published after The Information’s revelations, Pete Sweeney, an economics columnist for Reuters, mused that Apple’s investment in the deal apparently did not pay off in terms of revenue. “The company has generated $249 billion in sales in Greater China over the past five years, less than what it promised (in the 2016 deal),” Sweeney said.
“Apple’s share of the Chinese smartphone market has remained roughly the same since 2016, although it has benefited somewhat from White House sanctions that have driven Huawei, its closest domestic rival, from the (US) smartphone market.” , added the columnist, who pointed out that Cook will have difficulties in explaining himself to shareholders – aside from the political repercussions in the United States, with the “increased tension” between Americans and Chinese.
Nicholas Bequelin, Asia director for Amnesty International, said “Apple has become a cog in the Chinese censorship machine”. “When you look at the behavior of the Chinese government, you don’t see any resistance from Apple – no attitude of upholding the principles that Apple claims to be so attached to,” he told the New York Times.
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