Apple has admitted to storing Chinese users’ personal data on China Telecom servers for the first time in an effort to improve the speed and reliability of its iCloud service.
The storage of user data in China represents a departure from the policies of some US technology companies which have chosen not to build data centres in China due to censorship and privacy concerns.
Apple has denied that customer’s data is at any risk of compromise as Apple claims in a statement that all data stored is encrypted and that China Telecom does not have access to the content.
A source with knowledge of the situation said the encryption keys for Apple's data on China Telecom servers would be stored offshore and not made available to China Telecom.
But some experts expressed scepticism that Apple would be able to withhold user data in the event of a government request.
"If they're making out that the data is protected and secure that's a little disingenuous, because if they want to operate a business in China, they have to comply with demands from the authorities," said Jeremy Goldkorn, director of Danwei.com, a research firm focused on Chinese media, internet and consumers.
"On the other hand if they don't store Chinese user data on a Chinese server, they're basically risking a crackdown from the authorities."
A spokesman for China Telecom declined to comment.
With a rising middle class, China has become an increasingly important market for Apple. Sales of the iPhone rose almost 50 percent in China in the three months ended June and salvaged an otherwise lacklustre quarter.
Other companies have opted not to situate servers in China, where they would have to comply with local laws.
Google publicly abandoned China in 2010 and moved its services, including its search engine, to Hong Kong-based servers after refusing to comply with Chinese government censorship. Microsoft also does not have email servers in China.
Yahoo was criticised in 2005 after it handed emails to Chinese authorities that led to the imprisonment of Shi Tao, a journalist who obtained and leaked an internal censorship order the government had sent Chinese media.
"China doesn't want any digital service offered to Chinese people to be hosted offshore," said Goldkorn. "I suppose it was inevitable that Apple had to comply if they were using foreign servers for Chinese user data."
In July, Apple's iPhone was branded a danger to China's national security by state media, because of the smartphone's ability to track and time-stamp user locations. Apple denied tracking user locations.
Apple has frequently come under fire from Chinese state media, which accused the company of providing user data to US intelligence agencies and have called for 'severe punishment'.
The company has strongly denied working with any government agencies to create back doors into its products or servers. "We have also never allowed access to our servers. And we never will," Apple has previously stated.