Why Apple Inc. (NASDAQ:AAPL) Should Be Wary Of China


Just when Apple Inc. (NASDAQ:AAPL) was begun to count on China as its most important iPhone market, the government there has done what it knows best – strike. Apple’s iTunes and iBooks have been suspended in China, although the company said it was working to restore the services without providing a time frame. China is a tricky place and Apple should be careful if it wants to keep its business in the country, the world’s fastest growing economy.

Speculation over the shutdown

Early this year, Chinese regulators announced a set of new laws for the country’s media industry. Foreign companies are not allowed to engage in Internet publishing in China and it seems that’s where Apple got in trouble with Chinese media regulators. Some have claimed that carrying a controversial Hong Kong political movie in iTunes may have led to the suspension of iTunes and iBooks in China.

Occasionally, Chinese government likes to remind multinationals operating in the country that it is in control. As such, the iTunes shutdown may be just another show of supremacy by the country’s government. However, as China becomes an important market for its products, Apple needs to be careful about what it does in the country.

Apple produces in China

Apple Inc. (NASDAQ:AAPL) produces its products in China from the iPhones to Mac computers. Therefore, a disagreement with the Chinese government can cost Apple its business. Think about a case where Beijing bans manufacturing of Apple’s products in its jurisdiction. That would mean that Apple wouldn’t have inventory and without inventory Apple cannot make money. That explains why Apple has to dance the Beijing tune or face consequences that could bankrupt in a matter of months, if not days.

The tiger is sick

In the face of economic slowdown and a population that is aging rapidly, China’s control of the media seems to have heightened and Apple Inc. (NASDAQ:AAPL) is finding itself caught up in the mix of things.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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