Apple must have known the deal.

I’ve written about how the west has traditionally had a problem selling anything to the Chinese. Either they are too broke to afford western goods or their tastes just aren’t the same as ours. That’s why when the British discovered their taste for Opium they went to war to insure that the “market” stayed open. It appears that we have finally found something else they like that we make – new technology. The range of good stuff we are supplying is vast: Windows 8, Google search, iPhones… Being pure mercantalists, the Chinese government understands that it cannot ever buy this stuff from the west. To do so would corrupt its growth model and make it vulnerable to foreigners (even though a lot of the stuff is made in China).

When a company uses China as a manufacturing site it is told that it must do so with a Chinese partner and that the goods cannot be sold in China without strict government oversight (i.e. restrictions). Apple knew all this of course and to its delight found that local demand was taking off beyond the expectations of the government, so on Friday China said the iPhone “is a threat to national security”. The Trade Ministry also announced that their government would be “doing away with “untrusted Intel and AMD processors” over time, while launching an effort to build their own ARM-based “Baikal” processor and move to Linux for government systems. ” (Forbes) Do you remember how they blocked Google and replaced it with Baidu – by decree (Go Here for a refresher) .

Now Apple is squawking back at them, defending the phone and saying that the data is only processed in the device itself and that Apple does not track users’ locations. The entire discussion of privacy is a ruse intended to squash Apple and favor Xiaomi. The idea that a country protects its local producers is perfectly understandable even if ironically all the “foreign” goods are actually made inside China. The rest of the world needs to follow this economic nationalism. Egypt imports 10X more stuff from China than it sells (wow) so why are we surprised that its economy is a mess (Tom Friedman)?

In the old world (pre 1998) everyone used to (had to) buy locally made goods even when they knew they were inferior. We used to gloat about our better cars and blue jeans. Now that China makes everything for everybody, unemployment is pervasive and the 3rd world (including the Middle East) has been rendered unstable. Globalization, aka Chinese mercantalism, has ruined even small poor countries like Guatemala (imports exceed exports by 50%!).  China won’t even allow Apple to make a profit (off of Chinese buyers) because that money will go outside the country. It protects every nickel of domestic spending.

The entire world needs to take a leaf out of their book – even if it means that popular tech toys will cost more.

 

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