Several news sources have been reporting that, at long last, the iPhone will finally make its way to China after Apple was able to strike a deal with China Unicom. However, according to CNW (English translation), the integration of the iPhone may not be so easy; in fact, the App Store, from which customers can buy supplementary applications for their iPhones, presents a rather large problem.
In China, telecommunications businesses must apply for a "value-added telecommunications business license," which certifies that the company is allowed to function in the country, and subjects it to any conditions or standards set by the government, which currently include a minimum registered capital of 10 million yuan and and established reputation to "provide users with credibility and capacity." So far, Apple has not taken any steps toward obtaining this operating license and thereby receiving the approval of the Chinese government, but not a big deal, right?
Unfortunately, the issue is not simple as a bit of paperwork. One stipulation of the license is that the government must be able to monitor the activity of the company. Apple's servers for the App Store are not in China, and so they do not fall under Chinese jurisdiction. If the servers cannot be monitored by the Chinese government to a degree of their own satisfaction, the terms of a telecommunications license will not be fulfilled.
This is not to say that the iPhone can't go to China at all -- if Apple removes the App Store option, their application is otherwise fine. There's an old wives' tale that a sort of Cro-Magnon iPhone once roamed the earth pre-App Store, and they weren't so bad. However, the availability of such a wide variety of apps is one of the main advantages of an iPhone as compared to other smart phones, and that would be a hard leg-up to lose for Apple. Combining this with the lack of Wi-Fi capability, Apple's grapple with China is likely far from over.
Thanks for the tip, David!