Apple has recently been on the receiving end of some harsh criticism from officially sanctioned Chinese media. Past practice suggests that this is usually a sign of official displeasure which can often lead to commercial complications. KFC (Kentucky Fried Chicken), the most successful western fast food chain in China and Walmart (no explanation needed, we surmise) have both been pilloried by the press and then hit with a series of regulatory impediments to their operations. Mercedes Benz suffered a series of attacks similar to those now being thrust at Apple. In both cases, allegations that the 'arrogant' western companies practiced discrimination against Chinese customers compared to the service practices elsewhere in the world.
In most of these cases, the charges were trumped up by western standards. In some cases, little or no evidence of the charge was provided. But that was not the point. These companies were considered a threat because they challenged Chinese businesses whose executives managed to secure official backing, in this case to the strategically significant mobile phone market. Or they are being treated as pawns in a larger game of global competitiveness. Some observers believe that the deal to permit Softbank's acquisition of US telecom carrier Sprint only if the Japanese acquirer agreed never to use Huawei equipment was the trigger for this latest move. The Chinese have been sparring with Japan ever since the Japanese depredations in China during WWII, most recently over islands in the Pacific. The Chinese are sensitive to slights both commercial and political, particularly as new leadership begins its ten year reign and Apple is a threat to Chinese technology ambitions.
Whatever the excuse, given its difficult employment history in China and its economic clout, Apple may find its local ambitions thwarted, at least for the short term given the broader global competitive implications. JL
The Economist reports:
APPLE and China seem a perfect fit. Both are secretive autocracies that have produced spectacular economic results and technological marvels—but only for those willing to abide by the strict rules imposed within their great firewalled gardens. Apple is one of China’s most successful brands and China one of Apple’s most important markets.
So it is quite surprising to see the American technology firm come under repeated attack in recent days by mouthpieces for the state and Communist party.
On March 15th, World Consumer Rights Day, a much-watched annual programme on CCTV, the official broadcaster, attacked Apple’s policies and practices in China. The suggestion was that the greedy firm treated locals as second-class citizens. This week, the People’s Daily, a party mouthpiece, launched a series of vitriolic attacks that accused the firm of “unparalleled arrogance.”
It is not unusual for foreign companies to come under occasional attack in China. Sometimes, this is well deserved—as when, last year, KFC was exposed for supply-chain lapses that led chickens of dubious quality to be served in its restaurants. But the CCTV exposé, which discussed warranty-repair policies, did not find anything remotely as rotten at the core of Apple’s China business. So what is really behind all this?
One possibility is that the attacks are being orchestrated by a commercial rival that could gain from Apple’s misfortune. A number of celebrities rushed to join the CCTV attack on Apple by posting rude comments on Weibo, China’s version of Twitter. One of them, known to be a paid spokesman for a rival smartphone manufacturer, made the mistake of including in his Weibo posting the instruction to post the attack at a certain time—making clear that it was not written by him. Embarrassing, to be sure, but that does not prove a firm was behind this—especially since the other celebrity attackers are not thought to be on a rival’s payroll.
It seems more likely that Apple is the target of an officially-sanctioned attack, but which bit of officialdom might be pushing it remains unclear. Some think it might be a shakedown by CCTV, in order to encourage Apple to advertise on its channels. Others think that it is the vanity of bureaucrats at work. The ever-arrogant Apple may have failed to kowtow to the right officials in Beijing.
But what if Apple were merely a convenient whipping boy? Some think that this recent skirmish is in retaliation for foreign powers’ attacking Chinese firms abroad. The EU, for example, is currently taking a hostile stance towards China’s solar exporters. And American politicians have all but declared war on Huawei, a telecoms giant that stands accused—on no public evidence, it must be noted—of spying for the Chinese state.
It is just possible that the attacks on Apple are a prelude to pushing foreign firms out of the Chinese mobile-phone market. That seems ridiculous, given how popular Apple’s operating system and Google’s Android are in China. However, an official white paper did recently make the extraordinary claim that China’s reliance on Android was dangerous. The country’s censors or security enforcers may want to promote domestic operating systems that they can more easily penetrate, monitor or control.
There is another, even more troubling, theory that could explain the bizarre and unexpected attack on Apple this month. Taken together with other recent tirades against foreign firms like Volkswagen, this could mark a radically different approach to foreign companies being tested by China’s new leadership. Such sabre-rattling could be seen, on this view, as the natural complement to the belligerence seen over the Senkakus and in other military matters.
Truth be told, nobody outside the official inner circle has a clue what is really going on. The only certain thing is that the famously aloof technology firm is surely paying attention. “China is currently our second-largest market,” Tim Cook said to Xinhua, the official newswire of Chinese propagandists, before the attacks. He then perhaps tempted fate by going on: “I believe it will become our first. I believe strongly that it will.”
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