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China Expands Ban On iPhones and Watches As Trade War With US Escalates.

An Apple store in Beijing. Greater China accounted for about 20% of Apple's sales in the April-June period this year, and assembly of iPhones is also centered in Chinese factories. © Kyodo.

China has expanded its ban on the use of  iPhones ban to local governments and state-owned firms. China has a number of its own cell phone brands, like Huawei and Xiaomi, but none of them are quite as prestigious (or expensive) as Apple, which provides access to some applications not availbable elesewhere.

Central ministries and agencies have restricted the use of foreign-branded products in official business since around 2020. Such curbs have since been expanded to employees of local governments, including prefectures, and cities, and state-owned enterprises since around August this year, sources, including a government employee, told Nikkei.

Concerns over the impact on sales in the Chinese market have caused a substantial fall in the value of Apple’s stock, bringing  down Apple’s market capitalization by about $190 billion over two days.

This could well be the latest blow in a series of events fueling the growing tension between the US and China, the world’s two biggest technology providers. Analysts believe that it is a move to reduce the country’s dependence on American technologies.

China is not only Apple’s biggest foreign market but also the company’s global production base. Therefore, investors are worried about the future of the company which gets 20% of its revenue in China, the second biggest economy in the world.

An employee at a state-owned company in Beijing said she received a confidential notice in early September about the move. According to her, the notice said the ban will apply to company departments involved in trade secrets from Oct. 1 and to all employees from March 1 next year.

The company has restricted the use of iPhones as a “recommendation” for the past three years, and the majority of employees do not use them for work, according to the employee, although many have iPhones for personal use. The latest notice includes the Apple Watch and AirPod wireless earphones and prohibits them from being brought into the workplace, she said.

Around 2018, the Chinese government began to narrow its procurement of information technology equipment, such as personal computers, to Chinese companies by compiling a list of recommended companies and products. The PCs used in the central government’s ministries and agencies have been replaced by “Great Wall” PCs produced by state-owned enterprises.

The trend is spreading to smartphones. A central government official said, “Many of my colleagues now have two phones: a Huawei for work and an iPhone for personal use. ”

According to China’s National Bureau of Statistics, there were 56.33 million central and local government officials and employees of state-owned enterprises in China as of 2021. An analyst familiar with IT products in China said, “Many government employees already have two iPhones and Chinese-branded products, but if the [Communist] Party’s guidance spreads to private companies and individuals, the impact on sales will be inevitable.”

China is one of Apple’s most important markets, with greater China, which includes Taiwan and Hong Kong, accounting for about 20% of total sales in the April-June period this year. The assembly of iPhones is also centered in Chinese factories, and the company’s stock price fell 6.4% in two days from Sept. 6 to 7 due to reports of restrictions on use.

The Chinese government around 2010 restricted the use of the U.S.-based Google and Facebook and other companies in mainland China in an effort to foster domestic internet giants.

The U.S. has meanwhile restricted the use of Huawei products and TikTok, a video-sharing application originating in China, as the two countries continue to engage in a fierce battle for supremacy over economic security. Both appear to believe that the other uses cell phone technologies to spy on the other country.

Sources: Nikkei.The Verge, news agencies.