Apple’s success in China is owing to a contract with the Chinese government to help the country’s economy flourish, with CEO Tim Cook personally influencing authorities to get the best deal possible for the company.
Apple sees China as a key market, and the iPhone maker is working hard to gain a foothold there, both in revenue creation and massive supply chain activities. Years of hard work paid off in China, and it appears that a secret deal greased the wheels.
According to a report published by The Information on Tuesday, Tim Cook visited China in 2016 when Apple was dealing with regulatory activities in the country. According to reports, he inked an agreement with the Chinese government during that visit.
Apple would endeavor to strengthen China’s economy and technology profile through investments, workforce training, and different beneficial business transactions under the terms of the agreement. The five-year arrangement is said to have been worth $275 billion.
Apple, in China’s opinion, was not doing enough at the time to boost the Chinese economy. In addition, Apple executives were having trouble shifting Chinese attitudes due to increased regulatory scrutiny. On many visits, Cook is said to have persuaded officials on behalf of Apple and struck an agreement with a Chinese government agency.
According to political economist Victor Shih, the deal was politically clever since the two kept secret. It is believed that since Apple must satisfy China as both a key market and a manufacturing base, it must do so while without looking to other countries to be pleasing China.
“Apple likely wanted to avoid the optics of groveling to the Chinese government,” said Shih.
The agreement was a 1,250-word document drafted by Apple’s government affairs department. In May, Cook made a $1 billion investment in Didi Chuxing, spurring the finalization of the memorandum of understanding with the National Development and Reform Commission.
Apple will collaborate with Chinese manufacturers to develop “the most advanced manufacturing technology” and “help the training of high-quality Chinese talents” as part of the deal. In addition, it will also boost its use of Chinese suppliers for device components and engage in innovative technologies with Chinese institutions.
Apple also stated that it would invest “many billions of dollars more” in the country than it currently does in R&D facilities, renewable energy projects, and retail stores.
The pact was scheduled to last five years, with Apple pledging more than $275 billion in investment over that time. However, if neither China nor Apple disagreed, the agreement might be extended for an additional year until May 2022.
Apple’s China-based executives were taken aback by Tim Cook’s involvement with Chinese government officials. According to an internal report, Cook’s well-known ability to build connections with leaders had some Apple executives concerned that the corporation would be exposed unless local managers could form their own relationships.
In April, with Cook’s announcement that he will step down within the next decade, those managers are under even more pressure to improve their connections with officials.