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Apple Reportedly Invested Over $275 Billion in China Since 2016 as Part of Secret Deal

Apple ships millions and millions of iPhone units in China every year, with the country remaining one of the largest markets in the world for the company. A new report by The Information suggests that Apple CEO Tim Cook is to thank for this, having signed a secret deal worth about US$275 billion with the Chinese government in 2016.

Apple CEO Tim Cook. Credit: Stephen Lam via Reuters

Cook, in a visit to China that year, lobbied officials to repeal regulations against Apple, promising to help improve the country’s economy and technological capabilities through various investments and training programs.

The visit came at a time when iPhone sales in the country were said to be plummeting due to bad publicity brought about by Apple’s souring relationship with the Chinese government. The country’s officials at that time believed the company wasn’t contributing enough to the economy.

In an attempt to salvage the business relationship with Beijing, Cook signed a five-year agreement that would have Apple build new retail stores, research and development centres and renewable energy projects in China. The agreement also stipulates that the company must work more closely with Chinese companies and universities, which involves sourcing components from local suppliers and supporting the training of homegrown talents, among others.

The deal was reportedly signed shortly after Cook announced a US$1 billion investment in Chinese ride-hailing app Didi Chuxing.

In exchange, the Chinese government would provide the "necessary support and assistance" for Apple to continue operations in the country.

An Apple store at Hangzhou, Zhejiang province, China. Credit: China Daily via Reuters

The Information, citing interviews and internal documents, noted that the deal hasn’t been reported before, with both Apple and Beijing having been tight-lipped about the matter. The Cupertino company surely didn’t want the U.S. to find out that it was putting efforts into appeasing China, an important market and partner for the company, amid ongoing geopolitical unrest between the two superpowers.

China accounted for 19% of Apple's annual sales last year, recording US$68 billion in total earnings. Sales continued to surge this year, with the American tech company posting an 83% annual sales growth in its fiscal fourth quarter. Apple also gets a lot of the parts to make iPhones, iPads and Mac computers from the region.

Hence, Apple is willing to make some concessions with Beijing to keep business going. The company, for example, made the Senkaku Islands, a disputed territory which both China and Japan claim to own, appear bigger on Apple Maps to accommodate the demand of China's State Bureau of Surveying and Mapping. If Apple didn't comply, the Apple Watch purportedly wouldn't have been approved by Chinese regulators.

Apple has also been said to defer to Beijing's demands when it comes to the privacy and security of its users' data. The digital information of Apple users in China is reportedly stored in the company's new data centre in Guiyang, where the government can readily access them if they want to. This is, of course, goes against Apple's usual promises of putting data privacy at the core of its products and services.

U.S. President Joe Biden and Chinese President Xi Jinping in a 2013 meeting. Credit: Reuters

This new report will likely hurt Cook and Apple's reputation in Washington, especially with the Biden administration recently calling for a diplomatic boycott of this year's Winter Olympics, which is set to be held in Beijing, China. Perhaps even worse, as it is now, Apple isn't in good standing with U.S. lawmakers, having been questioned for alleged antitrust practices earlier this year. Being involved with the Chinese government could further reinforce the notion that the company puts financial gain ahead of its social, moral, and ethical obligations.

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