China’s $AAPL “Problem” Coming To An End?

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Earlier this month, China shut down iTunes Movies and iBooks just six months after Apple introduced the services there. Billionaire investor Carl Icahn told CNBC on Thursday that he exited his Apple position because “You worry a little bit – and maybe more than a little – about China’s attitude.”

Analysts from UBS and Goldman Sachs have posted recent reports explaining China’s potential power to demolish Apple’s growth, and Eurasia Group founder Ian Bremmer said earlier this week that China is probably to limit Apple’s access to the country’s consumer base. Other technology companies like Google, Facebook and Twitter are shut out of China, while big tech sector vendors IBM, Cisco and Hewlett-Packard have struggled in the world’s second-biggest economy because of government-favored domestic rivals.

Greater China accounts for one fourth of revenue and has supplied the most of the company’s growth, thanks to the rapid expansion of the Chinese middle class.

“It bears watching whether the recent ban of Apple’s iTunes and iBooks stores in China has broader implications for how friendly the environment remains for Apple to grow its business in the country” – Goldman Sachs analyst Simona Jankowski

The Justice Department, in attempting to refute Apple’s claim that it won’t hinder consumer privacy, said in a legal filing in March that the company aided the Chinese on 74 % of requests for iPhone data in the first half of 2015.

Coupled with the forced closure of two Apple services, it sparked a bigger debate about how far the Chinese are willing to go in pressuring the company and to what degree Apple would cooperate.”I’d be very surprised in five years’ time if we see Apple having the kind of access to the Chinese consumer that they presently enjoy,” Bremmer said. Bremmer of the Eurasia Group expressed that he could see Apple facing the same outcomes that have put the breaks on Facebook, which like so many U.S. websites, is not allowed in China.

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