Apple is not new to scrutiny in China, nor is it a stranger to political pressure to amend its ties to the Chinese government. While much of the press around its ties to the country has remained largely negatives, a brand new pay-walled report by The Information paints a different story.
According to the report, following the creation of the Shanghai Free Trade Zone which promoted tax breaks and regulatory exemptions to foreign companies in 2013, Apple executives in China contemplated the idea of creating a legal entity for the App Store. By doing so, they believed they would be able to operate the App Store as a free entity without Chinese joint venture partners.
While executives in China liked the idea, back in Apple Park executives were concerned that doing such would mean losing control over the App Store. That all however changed in 2018 when the US-China trade-war began to escalate, Apple finally decided to register the App Store as an entity however is yet to receive approval from Chinese authorities.
According to sources cited in the report, the Chinese government is refusing to approve the entity until Apple “makes more concessions that allow regulators to approve what goes into the App Store.” According to The Information, if the issues aren’t resolved, Apple faces the risk of regulators shutting down the whole App Store in China, home to more than 1.5 million apps.
Apple operates the App Store in China under no specfic venture or law, it doesn’t require apps to get Chinese govnerment approval before being published, unlike other app distribution platforms in the country. According to the report, Apple only screens out apps that cover sensitive topics such as Falun Gong, Dalai Lama, Tiananmen Square, Tibet, and Taiwan. Additionally, Apple only takes down apps if the govnerment asks them too, but also denies certain requests.
“Since the App Store first entered China, it has never been compliant with local laws,” said Rich Bishop, CEO of AppInChina. “Agreeing to China’s demands would be a form of editorial control, but the worry for Apple is that the vast majority of apps currently on the App Store wouldn’t be compliant.”The Information
The report also reveals that in 2013 when Apple introduced FaceTime Audio, the Chinese govnerment asked Apple to comply with local laws that require foreign companies to obtain a license and create a back door for authorities. Apple, ultimately placing privacy over features, decided not to comply with the law and instead disabled the feature entirely.
The report also reveals that Apple has not provided iOS source code to the Chinese government despite the fact that others such as Microsoft have. According to sources via the report, Apple has also abandoned its plans to launch Apple TV+ in China due to stalls in talks with Chinese regulators.
Former Apple employees are also raising alarm bells that the war against Apple from China is only beginning and that its a matter of time before China will require Apple to make the App Store fully compliant with Chinese law.