China rolled out new (and somewhat expected) regulations Tuesday governing app stores for mobile devices. Those regulations could have the direct effect of conscripting Apple and other app store providers into China’s surveillance and censorship machine.

Censorship in China

China’s Cyberspace Administration is responsible for the new rules. They require app store providers to verify the identity of users and developers, and to keep a record of all user activity for 60 days. App store providers must also monitor and report “postings that contain banned content” to Chinese authorities, to use Bloomberg’s wording.*

Conflicting Values

These regulations strike at the heart of potential conflict for Western corporations doing business in China. Communist and authoritarian values are at often odds with the theoretical democratic ideals. For many companies, this isn’t an issue—money is all that matters. These companies can and will hide behind the mantle of obeying local laws. Our hands are tied, they will say, and we follow local laws everywhere we do business.

It’s an easy out, and companies like Microsoft and Yahoo! have taken it—both remain in the search business in China. Google, on the other hand, decided to exit China rather than kowtowing to censorship rules on what Chinese citizens can search for.

Apple is not in the search business, but it is in the app store business, an important aspect of Apple’s ecosystem. China already shut down iBooks and iTunes movies in that country. Apple’s overall Chinese strategy could suffer significantly if it were forced to shut down the App Store, too.

Or if it chose to shut it down, rather than report banned content to Chinese authorities.

When Capitalist Push Meets Principled Shove

It’s an incredibly difficult position for Apple to be in. The company has an amazing brand in China and an opportunity to greatly expand its business in that country. But it’s becoming increasingly clear that even Apple will run afoul of China’s authoritarianism, sooner or later. With the new rules China announced, that moment may be now.

If so, what will Apple do? Part of me wants Apple to follow Google’s example and close the Chinese App Store.

*Another provision of the new regulations requires developers to get permission before collecting personal information, location data and contacts list. This is something Apple already does.

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Bryan: This is not an a straight-forward black and white issue, and easily nests within that quagmire of solutions that are ‘simple, obvious and wrong’. Without doubt, the obvious answer is that Apple should hold to their core principles, which include protecting user privacy, and refuse to participate, thereby shuttering its App Store in China. This would, of course, have the predictable consequence of gutting a principal value proposition of owning an iPhone or an iPad, and would adversely affect the sales of those devices in China. The upshot of this would be to cede the market, no doubt, to… Read more »

Lee Dronick

It is a tough situation with so many components from and assembly in China.