Speaker 1: Hong Kong's pro democracy protests have raged on for several
Speaker 1: months now, and with tensions flaring, China's cracking down on
Speaker 1: anything and anyone seemed to promote the movement. That's gotten
Speaker 1: several American companies in trouble, both at home and abroad.
Speaker 1: There's new fall out of this evening in the NBA's
Speaker 1: firestorm with China. The NBA tonight fighting back after being
Speaker 1: blasted for caving to China's communist government. Why did Act
Speaker 1: Division Blizzards suspend this guy? I guess it was to,
Speaker 1: you know, to butter up to China. Wasn't But few
Speaker 1: US companies depend on China's fourteen trillion dollar economy like Apple,
Speaker 1: and the company has made a series of moves that
Speaker 1: critics say bowed to the country's totalitarian government, including removing
Speaker 1: an app for Hong Kong's residents that displayed the movement
Speaker 1: of local police. Today. In the show, Bloomberg editor Alistair
Speaker 1: bar breaks down Apple's dilemm Can the company keep selling
Speaker 1: in China without losing its soul? A, Ma, you're listening
Speaker 1: to Decrypted? Stay with us? Elly? How's it going? Hi?
Speaker 1: I'm good? Do you want to introduce yourself. Yeah, I'm
Speaker 1: Alistair bar I'm an editor on the Tech team in
Speaker 1: the US. I want to start a conversation today at
Speaker 1: the very beginning, maybe about a decade ago, when Apple
Speaker 1: first started selling the iPhone, and it started selling the
Speaker 1: iPhone in China, tell us about the relationship that Apple's
Speaker 1: had with the country. It's been unprecedented, i would say
Speaker 1: for a US company. So iPhones are super super popular
Speaker 1: in China, and they became super super popular relatively quickly,
Speaker 1: but especially around two thousand four fifteen timeframe, when Apple
Speaker 1: made a bigger iPhone and it came out in gold,
Speaker 1: and it was it was a status symbol, and it
Speaker 1: was happening just a time when China was was really
Speaker 1: becoming a lot wealthier and people were emerging out of poverty,
Speaker 1: and there was a massive, huge middle class, and it
Speaker 1: was a super cool status symbol to have an iPhone.
Speaker 1: It was way ahead of most other phones in the world.
Speaker 1: So China really really embraced it, and they sold hundreds
Speaker 1: and hundreds of millions of these these phones. Okay, so
Speaker 1: that was fine for the first few years. China didn't
Speaker 1: seem to have a problem with Apple, but the company
Speaker 1: has gotten into Daisy Year situations over the last few years.
Speaker 1: So selling a fancy gold iPhone in China wasn't particularly controversial.
Speaker 1: But now Apple is a services company, so they have
Speaker 1: a new Apple News Plus service, for instance, that's not
Speaker 1: available in China at the moment. They have the iTunes store,
Speaker 1: they have the Eye bookstore, the bookstore, and those things
Speaker 1: have either never been in China or they were blocked
Speaker 1: pretty soon after they launched. So Apple, instead of just
Speaker 1: making gadgets, is now providing information over the internet, just
Speaker 1: like Google or Facebook has done in a slightly different way,
Speaker 1: but it's still in the eyes of China, that's still
Speaker 1: something that is a threat for sure. And that gets
Speaker 1: us to the recent controversy over an app called hk app. Yes,
Speaker 1: this is a basic mapping app that shows Hong Kong
Speaker 1: on your phone and it shows users where large amounts
Speaker 1: of police are so that they can avoid trouble. That's
Speaker 1: according to the developer, So tell us what happened. So
Speaker 1: originally this is in late September. H k map is
Speaker 1: submitted to Apple's App store, and this is a typical process.
Speaker 1: Developers wait for Apple to decide whether to let it
Speaker 1: in the store. It's a super big deal if they
Speaker 1: get let in the store. So initially it was rejected
Speaker 1: because of technical issues like like how it access payments
Speaker 1: and some other things. The developer then redid the app,
Speaker 1: re submitted it again, and this was in early October,
Speaker 1: and Apple then objected it for helping users evade law enforcement.
Speaker 1: We wrote that story up for sure, because that that
Speaker 1: had very very large political overturns and a lot of
Speaker 1: people are complaining about it on Twitter, and then we
Speaker 1: were on Apple to find out why and whether they
Speaker 1: were going to change their mind. Basically, Apple then went
Speaker 1: back on that and approved the app and led it
Speaker 1: into the App Store. And then soon after that, the
Speaker 1: People's Daily, which is the communist government newspaper they is
Speaker 1: shoed a an opinion piece which was really highly critical
Speaker 1: of Apple, and they they it was quite ominous and
Speaker 1: they said, it's, you know, we we were not sure
Speaker 1: what Apple's intentions are here. They may they may be
Speaker 1: helping people break the law, and so that in China,
Speaker 1: that that type of signal is basically the Chinese government
Speaker 1: coming down in you really hard. So very very soon
Speaker 1: after that, Apple Paul pulled the app again and so
Speaker 1: that that confluence of events really kind of proves that
Speaker 1: Apple basically did that just because the Chinese government wanted
Speaker 1: it gone. You know, I'm taking a look at the
Speaker 1: screenshot of HK Map and it it kind of looks
Speaker 1: like Ways, the traffic app that we use here in
Speaker 1: the States. Um, can you tell me a little bit
Speaker 1: more about that. Yeah, So the developer actually made that
Speaker 1: comparison on Twitter, and and our Apple reporter Mark German
Speaker 1: interviewed the developer as well, and his his point is that,
Speaker 1: you know, Ways is a mapping app and it can
Speaker 1: be used for many many different purposes. You can use
Speaker 1: it to avoid police speed cameras, which in a way
Speaker 1: is avoiding law enforcement too, but that the Apple still
Speaker 1: allows that into the app store, So that that was
Speaker 1: a major question, well was Apple's reasoning. So Tim Cook
Speaker 1: actually sent an email to Apple's staff about it, and yeah,
Speaker 1: his reasons we're pretty concerning. Really where where basically Apple
Speaker 1: took the side of the Hong Kong authorities and they
Speaker 1: were saying that the they had credible evidence from the
Speaker 1: Hong Kong authorities that the app was being used, um
Speaker 1: for malicious purposes to target Hong Kong police, and really
Speaker 1: that that went down very very poorly because they really
Speaker 1: didn't provide any evidence for that. Um. He also said
Speaker 1: that the app was being used to break laws, but
Speaker 1: they didn't really say what laws were being broken. And
Speaker 1: no one, no one that I've read, has actually managed
Speaker 1: to find a law that has been broken. Michaels of that,
Speaker 1: We'll be right back saally before the break. You walked
Speaker 1: us through this debacle surrounding the app h k app.
Speaker 1: But it hasn't been the only way that Apple seems
Speaker 1: to be appeasing the Chinese government censors recently, so late lately,
Speaker 1: Apple pulled the Taiwanese flag emoji from the latest version
Speaker 1: of the iPhone software that came out. Basically, if you
Speaker 1: were in Hong Kong or Macau, it's very hard for
Speaker 1: you to send a Taiwanese flag EMODI to someone else
Speaker 1: in mainland China. That was already the case that you
Speaker 1: could you couldn't send it um, so that that caused
Speaker 1: some people concerned, probably not as big as the Hong
Speaker 1: Kong map issue, but another another good example. And then
Speaker 1: back in two thousand seventeen, a really really big one
Speaker 1: was the Apple removed VPN apps from the app store
Speaker 1: all of them, and there were lots and lots of
Speaker 1: those apps, and that was a really very common way
Speaker 1: for people in China to get around the Great firewalls.
Speaker 1: So if you wanted to check what was on Twitter,
Speaker 1: you fired up one of these VPN apps and it
Speaker 1: spoofed your location and it gave you access to Twitter
Speaker 1: and even Facebook to some degree. So China really really
Speaker 1: cracked down on that and Apple basically got rid of
Speaker 1: them all from the app store. That was that was
Speaker 1: a real major one. And then the one that I
Speaker 1: think is super super interesting. We didn't report it unfortunately,
Speaker 1: that BuzzFeed did and over the weekend. So Apple has
Speaker 1: a new TV streaming service that's a bit like Netflix.
Speaker 1: I've seen the commercials for it. Yeah, it's all over
Speaker 1: the place. Yeah, so they're really pushing that hard. About
Speaker 1: a year or so ago, when Apple was wooing the
Speaker 1: creators and of these TV shows that they're going to
Speaker 1: stream online, they basically asked some of these creators not
Speaker 1: to portray China in a in a poor light. And
Speaker 1: Eddie Q, who's kind of the number three guy Apple,
Speaker 1: was the one delivering that message. So that one especially
Speaker 1: is particularly disconcerting. I think It happens kind of a
Speaker 1: lot in Hollywood, where China provides a lot of financing
Speaker 1: to movie studios, so they have to be super careful.
Speaker 1: But Apple likes to think of itself as being different.
Speaker 1: It stands up for ideals and freedom of speech and
Speaker 1: privacy and things like that. And you know, in China
Speaker 1: right now, this this this episode shows that it is
Speaker 1: probably not happening. And of course this isn't just about
Speaker 1: the tech companies, and it's also not just about Apple.
Speaker 1: It's also about the NBA. The NBA example is super,
Speaker 1: super interesting. So the general managers the Houston Rockets tweeted
Speaker 1: support for the Hong Kong protesters, and there was a
Speaker 1: swift response from the Chinese government after that. The Chinese
Speaker 1: National TV broadcaster basically halted broadcasting any of the NBA games.
Speaker 1: And the market there is huge for the NBA, about
Speaker 1: half a billion viewers, and that's a lot of merchandizing,
Speaker 1: that's a lot a lot of advertising, and you know,
Speaker 1: all that stopped very very quickly after that tweet. I
Speaker 1: guess these Western companies that want to sell to China
Speaker 1: do have to play this very delicate dance that gets
Speaker 1: them into these controversies increasingly more so probably, I guess
Speaker 1: one argument is to say, and certainly this is what
Speaker 1: free speech activists would say, it's just not worth it
Speaker 1: to sell your soul to China. But if iPhones were
Speaker 1: to get banned from China, that would be catastrophic for
Speaker 1: Apple's business. Yeah, it would be huge. The revenue that
Speaker 1: Apple gets from Greater China, which is China, Hong Kong, Taiwan,
Speaker 1: is over fifty billion dollars a year, and that the
Speaker 1: market there is super super valuable. But it's also very fickle.
Speaker 1: So when when the Chinese government is unhappy with Apple,
Speaker 1: bad things happen, probably indirectly. A really good example of
Speaker 1: that is with Huawei, which is China's national champion when
Speaker 1: it comes to tech companies. And so the US really
Speaker 1: cracked down on Huawei roughly about a year ago, something
Speaker 1: about a year ago. Soon after that, in the in
Speaker 1: the next quarter, Apple's iPhone sales in China they didn't
Speaker 1: do very well, and Huawei's sales rose quite a bit.
Speaker 1: And and so nothing over was ever said by the
Speaker 1: Chinese government and anything like that. But the theory is
Speaker 1: that basically, either there was a national outpouring of support
Speaker 1: for for Huawei, or the Chinese government was sending a
Speaker 1: subtle message to everyone, do not buy iPhones by Huawei phones.
Speaker 1: So there's a real there's a real impact if Apple
Speaker 1: has to keep the Chinese government happy, because that was
Speaker 1: a little taste of what could happen if things continue
Speaker 1: to go bad, right, I wonder if Apple has a
Speaker 1: little more leverage then it thinks though, because it's such
Speaker 1: a big employer in China. Yeah, that's that is a
Speaker 1: really really good point. Almost all iPhones were assembled in China.
Speaker 1: At least a million people are hired to do that,
Speaker 1: and so if Apple suddenly couldn't sell hundreds of millions
Speaker 1: of phones in China, then then some of those people
Speaker 1: would lose their job or because of the trade war
Speaker 1: and and tariffs and things like that, if Apple decided, oh,
Speaker 1: why we're gonna make We're going to make all iPhones
Speaker 1: in Vietnam and India, that would be really devastating to
Speaker 1: the Chinese economy. And then then in the Chinese government
Speaker 1: would not want that to happen at all. So there
Speaker 1: is certainly a two way street going there. So if
Speaker 1: Facebook and Google and all these other Internet giants that
Speaker 1: have been trying and failing to get into China. What
Speaker 1: do you think their executives are thinking now as they're
Speaker 1: watching this unfold? Maybe relief. So even just a year
Speaker 1: ago they were desperate to get into China, now it
Speaker 1: looks like it would be a huge headache for Google
Speaker 1: and Facebook if they were in China and they would
Speaker 1: be there making the same terribly difficult decisions that Apple
Speaker 1: is making right now, and especially for someone like Google
Speaker 1: with the famous motto do know evil? You know, if
Speaker 1: they were in China right now and they were they
Speaker 1: were serving sensored search results in an environment like this,
Speaker 1: that would be extremely hard to support. And I think
Speaker 1: they would get a big backlash from customers but also
Speaker 1: from from their employees very much. So, if you believe
Speaker 1: in the ideal of freedom of information, do you think
Speaker 1: it's even possible for American companies to act ethically in
Speaker 1: China today? I think that's very, very different. Called So
Speaker 1: when I think about Apple in China today, I go
Speaker 1: back to the famous four ad that around you in
Speaker 1: the Super Bowl for Apple Macintos computers, and back then,
Speaker 1: the ad showed totalitarian dictator on a big screen saying
Speaker 1: nasty things and everyone's standing there straight, I'm looking scared.
Speaker 1: We are wanted resolved. And then a woman appears and
Speaker 1: smashes the screen. And the whole message was that Apple
Speaker 1: was going to fight totalitarian um and you'll see why
Speaker 1: four will be like four. And now fast forward many
Speaker 1: many years later, Apple is in China, is having to
Speaker 1: deal with this government and and really it can be
Speaker 1: seen to be being forced to enable a form of totalitarians.
Speaker 1: Alista Bart, thanks for coming on the show today, my pleasure,
Speaker 1: Thank you for having me. This episode of Decrypted was
Speaker 1: produced by me Ao, Sean Wyne and Too for Foreheads.
Speaker 1: Our story editor is in vander May. Francesco Leavie is
Speaker 1: the head of Bloomberg Podcasts. We'll see you next week.