Apple store in Beijing. Photo by Chinnian via Flickr (CC BY-SA 2.0)

Hackers backed by the central Chinese government have been staging man-in-the-middle (MITM) attacks on Apple's iCloud in an attempt to steal iCloud user data such as iMessages, photos and contacts. According to Greatfire.org, a research group focused on Internet censorship in China, the attacks took place when Apple launched iPhone6 in China on Oct. 17.

In the course of the attacks, hackers interposed their own website, with a fake iCloud.com certificate, between users and Apple's iCloud server to intercept user data. Earlier that day, Google, Github and Yahoo faced similar attacks aimed at stealing their users’ passwords.

Greatfire saw the attacks as emblematic of the proverbial price paid by foreign companies that choose to make their services available in China, and posited that the attacks were triggered by the increased encryption standards on the iPhone 6 and the spreading of pro-democracy protest news, images and videos to mainland China through encrypted iCloud servers. The group further explained that the attacks appeared to originate from “deep within the Chinese domestic Internet backbone” and China Internet providers could not be unaware of the data interception.

Apple was aware of the MITM attacks but its iCloud servers have not been compromised. Last week, soon after the MITM attacks on iCloud, Apple CEO Tim Cook met with Chinese Vice Premier Ma Kai. Privacy and security were among the issues brought up in the meeting, according to a report from Chinese state Xinhua news. But the main objective of the meeting is to prepare for the company's plan to bring its products and services to China, starting with Apple Pay.

This past July, China's state-run broadcaster CCTV accused Apple's iPhone of posing a threat to China's national security, forcing the company to delay the sale of the iPhone 6 in China. In August, Apple moved Chinese users’ iCloud data to China Telecom, which has become the target of the latest round of MITM attack.

Apple iPhone's market share in China has increased in recent years to 15.2%. However, the market expansion in China comes with a price tag, as Greatfire warned:

This episode should provide a clear warning signal to foreign companies that work with the Chinese authorities on their censorship agenda. Working with the authorities to help them prevent free access to news and information is not a guaranteed path to riches in China. If anything, cooperation with the Chinese authorities can now increasingly be labeled as the worst decision a foreign company can make. Not only will the authorities bite you in the ass, but your willingness to work with the censorship regime will lose you customers and fans worldwide.

When Google confronted a similar dilemma in 2010, the Internet giant decided to terminate its search service in China. The decision has hindered Google's other business in China and its other online platforms, such as Gmail, Google+ and others have suffered from disruption of services. On the other hand, social networking platform Linkedin has decided to operate in accordance with China's censorship practices. After launching its Chinese site in February, the Silicon Valley company drew fire from human rights organizations and its customers when the platform started hiding status updates from overseas users to mainland users and vis versa.

Similar to Linkedin, Apple made some concessions for continuing its service in China over past few years, in particular after China's state-controlled media launched an attack on Apple's products and services in March 2013. The company issued an apology to Chinese customers in April. Around the same time, China's National Office Against Pornographic and Illegal Publications asked Apple to remove obscene content accessed through its online applications store. Apple complied with the order but among the supposedly obscene content removed was an application that provided access to banned books about Tibet, written by famous scholar Wang Lixiong. In October 2013, circumvention application OpenDoor was take down. And two months later in December 2013, another circumvention application, FreeWeibo app was also removed from iTunes. There may be even more examples that we do not yet know about.

While these concessions thus far have only affected its customers in mainland China, the company's image may continue to erode if more concessions are made in exchange for business.