Apple's reputational crisis in China: between a rock and a hard place

Apple may be forced to weigh up whether operating in China -- its third largest market -- is worth the degradation of its global reputation.

Apple "had few options" but to bow to Chinese rule and pull an app that was being used by Hong Kong protestors from its store, but it must now decide whether it can survive in China in the long term, according to corporate affairs expert David Wolf.

The electronics giant last week found itself in the eye of the China-Hong Kong storm following its decision to remove two apps for reasons related to the escalating Hong Kong protests.

The first was the news app of publisher Quartz, which has written extensively on the protests. Apple removed the news app from its China app store, and the publisher’s website has also been blocked in the country.

The second — and the one which drew the most attention — was an app which crowdsources real-time locations of traffic obstructions, police and protesters in the territory, HKmap.live. The app was being used by protestors to organise movements. Apple approved the app at first, then succumbed to pressure from Chinese state media and withdrew it from its digital store.

The business’ chief executive Tim Cook — who has said in the past that "companies should have values, like people do" — defended its decision over HKmap.live saying in an email to employees that the company had received "credible information" from the authorities "that the app was being used maliciously."

Wolf, who is the managing director of Allison Advisor, the management consulting unit of PR firm Allison+Partners, says Apple likely believed it had no choice but to pull the app once Chinese state media began to criticise it.

"Apple understands that whatever its own beliefs and intentions, it must comply with the laws and customs of the markets in which it operates," he says.

"Beijing often telegraphs its regulatory intentions through state media, giving companies a chance to step into line before taking enforcement action. Failing to ‘take the hint’ could be seen as open defiance of the authorities in Beijing, and Apple clearly does not want to risk its massive China business for the sake of a single app."

Wolf, who is an expert at Chinese relations having formerly lived in Beijing for nearly two decades, says in the case of HKmap.live, the company had "few options".

"The situation in Hong Kong is seen in Beijing as a matter of social stability, which is one of the [Communist] Party’s primary mandates. There may be issues on which Apple has room to parlay with the Chinese government, but this one is far too sensitive, and Beijing would like nothing better than to have an excuse to punish the world’s largest company," he suggests.

But this is not the first time Apple has seemingly kowtowed to Chinese rule. It recently removed the Taiwanese flag emoji from iPhone keyboards in certain areas, including Hong Kong. The company has also been criticised for removing VPN apps — which protect users from government censorship and surveillance — from its China app store. While it has been defending its position in China — its third-largest source of revenues — Apple’s decisions have irrefutably damaged its reputation beyond the mainland.

According to Wolf, it must now decide whether that price is worth paying. "In this case, Apple complied with the law to preserve its business. Long term, though, the company has a strategic choice: allow its global reputation to suffer the death of a thousand cuts by continuing its compliance, or give up the China market and surrender it to its strongest rivals," he suggests.

Commenting more broadly on the current tensions between China and Hong Kong, Ray Rudowski, managing director of Epic Communications, says: "This is an extremely sensitive time for all companies with a presence in Greater China. It's a situation now where once something is said it can't be unsaid, there's no way of ‘spinning’ this to avoid controversy or crisis.

"All these recent cases demonstrate that companies must become more familiar with the specific social, political and economic issues and the impact any decision they make will have on their consumers.

"Avoiding issues through preventative risk audits, scenario planning, stakeholder engagement and reputation maintenance is more effective than trying to talk your way out of an issue once it's begun escalating," he concludes.


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