China's move to expand a ban on iPhone use by government officials, analysts say, isn't really about national security or economic concerns. It's about making a loud global statement.
- China last week reportedly extended a ban on using Apple iPhones to employees of government agencies and state-owned enterprises.
- The U.S. called it retaliation for its approach against China's Huawei.
- Analysts say it's about more than national security or economics.
In recent weeks, reports seemed to confirm China barred employees at government agencies and state-owned enterprises from using iPhones or other foreign-branded devices at work. The news sent Apple (AAPL) stock to a one-month low.
This past week the country denied implementing the ban, but it has increasingly attempted to reduce the country's reliance on foreign technology. Similarly, the U.S. government in 2019, citing national security concerns, banned U.S. companies from selling software and equipment to Huawei, China's technology giant.
The Biden Administration this past week called China's reported ban "inappropriate retaliation" for the U.S. approach to Huawei.
But Douglas Nelson, who is a Ph.D., an economics professor specializing in trade policy at Tulane University and a fellow of the Leverhulme Centre for Research on Globalisation and Economic Policy at the University of Nottingham, said it's more than that.
"I suspect it's about public politics," Nelson said. "The Chinese government is saying, 'We're not going to be pushed around.' And that plays well in China. Bashing the U.S. really works."
U.S. vs. China
It's no secret that U.S.-China relations have deteriorated dramatically in the past generation, particularly after Chinese Premier Xi Jinping took control of the government a decade ago. Once inconceivable and still a remote possibility, a war between the two nations has entered the geopolitical discussion realm, Nelson said.
That's part of why the U.S. took action against Huawei, a firm whose global presence also concerns the European Union. It's likely no coincidence that last week's reported ban occurred just before Apple unveiled its latest iPhone version—and just after Huawei released a new 5G mobile phone that triggered an investigation by the U.S. Department of Commerce.
Particularly in the wake of the COVID-19 pandemic, China's nationalistic pronouncements have grown louder, Nelson said. He added that the recent reports on Apple provide a form of "pressure release" for the Chinese public in the face of mounting economic woes.
"The notion that the U.S. is a bully is very strong in China," Nelson said. It's a sentiment that exists in other parts of Asia, he added, even among U.S. allies such as India—meaning China's intended message extended beyond China's borders.
Not About Apple
For Apple, the impact likely has more bark than bite. In a note to investors, J.P. Morgan said the restrictions "amplify the challenges in China," but by itself, they represent only a modest financial risk for the company.
In a separate report, Wedbush Securities agreed.
"We believe this is a very limited warning shot in very select government agencies in China that will have negligible impact on Apple's China growth over the next year," Wedbush said.
However, Nelson said the iPhone ban's economic impact isn't the point for Xi and China.
"They're doing something that is not economic," he said. "It's nationalistic. It's adopting a policy that's visible, and that's a win (for the Chinese government)."
It's also not solely a response to U.S. action against Huawei or its additional U.S. consternation regarding China-based social media powerhouse Tik-Tok, he said. It's more troubling because it's part of a broader trend between the two nations.
"What worries me is this is an accumulation of things," Nelson said. "We are way better off if we are far away from fighting one another."