China Just Declares War On Apple

(Forbes) On Friday, Chinese state media reported that, from January of last year to the end of last month, more than 20,000 college students in the central city of Wuhan applied for 160 million yuan of “high-interest rate loans” from Home Credit China.  The finance company was charging rates of up to 47.12% for one-year money.

 

Beijing’s saturation coverage mentioned Home Credit China’s unsavory lending practices, but that was not the primary point of the reporting.  The reporting, based on a Xinhua News Agency dispatch, complained that Chinese students, who were generally portrayed as victims, were buying “fancy electronic products,” especially from Apple.

The Xinhua reporting was notable in that it was the second attack on the iconic American brand in as many weeks.  On the 15th of this month—World Consumer Rights Day—China Central Television severely criticized Apple’s warranty practices

The state broadcaster’s annual investigative program, “3.15,” noted that the company discriminated against Chinese iPhone owners, offering shorter guarantees than in other countries, using refurbished rather than new parts, and shirking after-sale obligations.  Last August, Apple modified its policies, but Xinhua said they were still “unfair.”  The company’s repair practices “caused some provincial consumer watchdogs to include the firm on a ‘company integrity’ blacklist.”

CCTV’s program, which has run for 23 years, has nationwide bite, calling out consumer-products companies and hitting them where it hurts, their sales and stock prices.  On Weibo, China’s extraordinarily popular Twitter-like service, Apple was mentioned 50,000 times in the first hour after the show’s segment on the company aired.  Most of the comments were critical of the brand.

For instance, Peter Ho, a Taiwanese-American actor with 5.3 million Weibo followers, posted this on the microblogging site: “#315isLive# Actually, Apple has so many tricks in its after-sales services.  As an Apple fan, I’m hurt. Have you done right by your founder Jobs? Have you done right by the young people who sold their kidneys?  It’s really true that big stores bully customers. Post around 8:20.”

“Post around 8:20”?  Ho had goofed.  The movie star uploaded not only his sharply critical posting at 8:26 P.M., but he also posted the instructions he received from some other party.  He is a Samsung Galaxy spokesman, but no one is fingering the Korean brand as the culprit.

So who told Ho to post “around 8:20”?  For China’s noisy netizens, there was only one suspect: CCTV.  Weibo users immediately pounced, noting that there were other anti-Apple postings around that time.  By 8:45 P.M. comments criticizing the inattentive Mr. Ho were overwhelming the anti-Apple postings.

Ho, at 10:08 P.M., deleted his original posting and then denied he authored the attack on Apple, claiming that someone had “hacked” his Weibo account.  Just about nobody believed the denial.  Users began posting acerbic comments with the #PostAround8:20 hashtag.  Weibo censors later deleted tens of thousands of postings with that hashtag.

The incident is now being called “Ho-gate” in China.  CCTV got caught red-handed orchestrating a broad-based follow-up campaign to its 3.15 program.  “Weibo and CCTV often work together to coordinate discussion on the social networking site, asking high-profile Weibo users with large numbers of followers to comment after programming or to weigh in on big issues,” reports the Wall Street Journal’s China Real Time Report blog, relying on someone who had been asked to participate.

Is Beijing beginning a campaign against Apple?  The best way to avoid attention on 3.15 is to advertise on CCTV, so perhaps there is a simple explanation for this year’s attack on the brand: the broadcaster was giving the company a powerful incentive to purchase ad time on its channels.  Unfortunately, that relatively benign—and cynical—interpretation is probably too optimistic.  As we saw from Friday’s countrywide reporting on student purchasing habits, Beijing is continuing its attack on Apple.  Executives in Cupertino should get worried that the 3.15 show is not a one-off.

And other companies should begin to see a pattern.  Beijing appears to have begun a long-term campaign against foreign brands.  This year’s 3.15 program also targeted Volkswagen.  Last year’s show went after McDonald’s and Carrefour.  In December, state media hit Yum Brands.  And not all foreign companies are as fortunate as Apple, which looks like it escaped damage because an actor flubbed his lines.  Some of the Chinese government’s attacks are having an effect: Yum’s same-store sales in China plunged 20% in the two months following the December reporting.

Moreover, Google has been the object of a multi-year effort to undermine its operations in China, and Beijing just signaled it was upping the stakes.  This month, China’s Ministry of Industry and Information Technology issued a white paper claiming that China was too dependent on the company’s Android mobile operating system.  Guess what happens next.

Back at Apple, company executives apparently did not see the storm coming.  “China is currently our second largest market,” Tim Cook said in January to Xinhua.  “I believe it will become our first.”  That is about the last thing Apple’s CEO should have said to an increasingly nationalistic media.  We should not be surprised that Chinese officials, determined to protect domestic competitors, started to take on his brand soon after that prediction.

The truth is that Beijing, despite its trade obligations, will do its best to cripple foreign companies.  Its tactics can be subtle or vicious as the occasion dictates.  Its attacks may not work, but it is nonetheless predatory in intent.

It looks like China’s one-party state has just declared war on Apple.  Its first attack failed.  It will not give up.