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Apple sees China growth on the back of WeChat success

Apple is making greater inroads into the Chinese market thanks to growing software sales, particularly of popular mobile messaging app, WeChat.

The increasing popularity of casual games has made China Apple's third-largest market for software sales.

Read more: China and Apple deny existence of any ban on MacBooks, iPads or other products (opens in new tab)

Known locally as Weixin, WeChat has more than 400 million monthly active users globally, mostly in China, and has evolved from a simple messaging tool to a service that lets users play games, book taxis and shop online.

The app has also helped convince users to connect their bank accounts to their phones, in a market where consumers are notoriously reluctant to pay for software. As a result, Apple's Greater China revenues, which include Hong Kong and Taiwan, increased by 28 per cent in for the second quarter compared to twelve months ago.

Apple ensures that all sales on its iPhone go through its official App Store, with the Cupertino-based firm typically taking 30 per cent on each sale. Ben Thompson of Stratechery (opens in new tab)said the arrangement has been extremely profitable for the firm.

"By far the biggest factor driving App Store revenue in China is WeChat. WeChat has driven app download and usage, which drives people to want to buy stuff, which drives them to connect their payment information. It's been a very virtuous cycle."

Apple has also made attempts to use China's complicated banking payment system to its advantage. The firm uses a top-up system for its App Store, with a 50 yuan (£5) minimum value for those using China's national bank card payment network, meaning a lot of users are encouraged to make multiple purchases.

However, while Apple has benefitted massively from WeChat's popularity overseas, there is concern that the app's developer, Tencent, may want Apple to see a smaller share of this success. It has also been suggested that China's ruling Communist Party is increasingly targeting regulations at foreign companies, with Apple regularly coming under fire from the state media.

"The biggest danger for Apple in China is always the uncertain regulatory environment," Thompson said.

Read more: WeChat tops 355 million users, sets sights on WhatsApp (opens in new tab)

"It's very plausible to see the government moving against Apple's App Store policy."

Barclay has been writing about technology for a decade, starting out as a freelancer with IT Pro Portal covering everything from London’s start-up scene to comparisons of the best cloud storage services.  After that, he spent some time as the managing editor of an online outlet focusing on cloud computing, furthering his interest in virtualization, Big Data, and the Internet of Things.