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According to a new report, Apple CEO Tim Cook "secretly" struck a deal worth more than $275 billion with the Chinese government, promising that Apple would help develop China's economy and technological capabilities.
Apple's success in China is reportedly due to an agreement with the country's government to support economic development. The Information according to Apple CEO Tim Cook personally went to the authorities to get the best deal for the company. For Apple, China is an important market where the iPhone maker is making significant efforts to make headway - both in terms of customer acquisition and its extensive supply chain. The success in China was a turning point for years and it seems that a secret agreement is the cornerstone. The report states that Tim Cook visited the country in 2016 when Apple was facing a series of regulatory measures in China. During this visit, he signed an agreement with the Chinese government. This is what The Information claims to have found out.
Apple was forced to lobby
The agreement calls for Apple to improve the Chinese economy and the country's technological profile through investments, training its workforce, and various advantageous business deals. It is claimed that the total value of the five-year agreement was $275 billion. Internal documents allege that Apple was not doing enough to support the local economy in the eyes of Chinese authorities. Faced with tight regulatory scrutiny, Apple executives struggled to change Chinese opinion of the company. During several visits, Cook is said to have lobbied on behalf of Apple and signed the contract with a Chinese government agency. The lobbying against various threats that would have affected the App Store, Apple Pay, and other products was largely successful, although it was not reported at the time.
Apple's relations with China
The deal was kept secret by both the company's culture and the opaque workings of the Chinese government, and was politically astute, according to political economist Victor Shih. It is believed that Apple needed to keep China happy as a major market and manufacturing base in order to keep the government happy while not giving other countries the impression that it was appeasing China. Shih writes:
Apple probably wanted to avoid the appearance of kowtowing to the Chinese government.
The most significant deal was an agreement drafted by Apple's government affairs department, designed to improve relations with the Chinese government and potentially gain the attention of leading politicians. The agreement with the National Development and Reform Commission was signed shortly after Cook announced a $1 billion investment in Didi Chuxing in May. Under the agreement, Apple committed to working with Chinese manufacturers to develop "the most advanced manufacturing technologies" and "support the training of high-quality Chinese talent." It also promised to increase its use of Chinese suppliers for device components, collaborate with Chinese software firms and invest in technology companies, and work with Chinese universities on new technologies.
Agreement can be extended
Apple also announced it would invest "many billions of dollars more" than its previous annual spending in China, including in research and development centers, renewable energy projects, and retail stores. The agreement was for five years, including Apple's pledged spending of more than $275 billion during that period. However, the agreement can be extended for another year, until May 2022, if neither China nor Apple objects, the report said. Apple would also commit to "strictly complying with Chinese laws and regulations"—phrasing that occasionally resurfaces when Apple discusses privacy issues in China, such as transferring Chinese customer data in iCloud to a Chinese company.
Apple depends on Tim Cook's negotiating skills
While Apple's responsibilities were outlined in detail, China's commitments were more ambiguous, stating that it would provide Apple with the "necessary support and assistance." Tim Cook's lobbying of high-ranking officials and other branches of the Chinese government, oddly enough, caused more concern among Apple executives based in China. Cook's renowned ability to build relationships with leading figures led some Apple executives to believe that the company could be vulnerable if local managers couldn't develop their own relationships, according to an internal document. Now, The Information suspects that Apple is heavily dependent on Cook for international negotiations and speculates that the company could face difficulties with government affairs if Cook leaves as CEO. (Photo by DFree / Bigstockphoto)
