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Apple is more dependent on China than ever

Aaron Pressman
Traders buy newly-released Apple iPhone 6s and iPhone 6s Plus smart phones from people who bought the phones earlier from an Apple Store, at Mongkok shopping district in Hong Kong, China September 25, 2015. REUTERS/Bobby Yip

China just keeps getting more important to Tim Cook's Apple (AAPL).

Last quarter, sales in the region not only doubled from a year earlier to $12.5 billion -- they also accounted for two-thirds of all of Apple's sales growth in the quarter.

Cook helped set off the China boom by focusing on building more Apple stores in the country over the past few years, but the addition of larger screen iPhones beginning in 2014 really sent sales into high gear. Over the past 12 months, Apple increased its total sales by $50.9 billion, which includes a $26.9 billion gain from China alone.

And the dependence has been growing -- the sales increase in China accounted for only 39% of Apple's total sales growth in the last quarter of 2014, 57% in the first quarter of 2015, 58% in the second quarter and 66% in the just completed third quarter.

The trend has some analysts worried, since China's economic growth has been slowing. Last week, China's central bank reduced interest rates for the sixth time as concerns continued to mount that the Asian titan wouldn't meet the government's 7% growth target for this year. And consumers were said to be frightened after the Shanghai Composite Index fell 40% from June through September.

Fears about a possible slowdown in Apple's sales in China have been a primary concern for investors, helping drag Apple's share price from over $130 in June to a low of $92 in August. The shares have rebounded a bit and were up 1.6% to $116.27 in premarket trading on Wednesday.

The pre-market bump came after Apple reported that its overall sales for the just-completed quarter increased 22% to $51.5 billion, slightly more than the $51 billion analysts expected. Earnings per share of $1.96 also beat expectation for $1.88. And Apple's revenue forecast for the all-important holiday quarter of $75.5 billion to $77.5 billion fit with analysts expectations of $77 billion of sales.

Sales to China increased 99% from a year earlier. Apple took the sales lead in China among all smartphone manufacturers last month, according to Counterpoint Research. The company's new rose gold colored models were the most popular color in China, the firm said. Apple "is becoming an embedded brand in China, standing for luxury and high quality," Counterpoint research director Peter Richardson said.

Cook has tried to reassure the market that Apple's Chinese sales remain unaffected. He was back at it on Tuesday's call with analysts.

“Frankly, if I were to shut off my web and shut off the TV and just look at how many customers are coming in our stores … and in addition looking at sales trends, I wouldn’t know there were any economic issues at all in China,” Cook told analysts. “I don't think it’s growing as fast as it was, but I also don't think that Apple's results are largely dependent on minor changes than growth.”

Experts on the Chinese economy have largely endorsed Cook's view. They note that the long-term trend in China of poor people moving up into the middle class remains intact. And even lower income people in China have shown a propensity to shop for Apple products.