In a battle that has seemed one-sided for the most part, China has now taken action against the US’ forceful handling of Chinese hyper popular app TikTok.
US President Donald Trump had issued executive orders on August 7 that would ban TikTok (as well as Chinese app WeChat) from operating in the US in 45 days if they are not sold by their Chinese-owned parent companies. With a US ban looking increasingly likely, TikTok was courting US buyers like Microsoft, Walmart, Oracle, and others, looking to appease American oversight.
Now, China has thrown a wrench in the US’ plans, just as sale talks were making progress.
China updates export laws
According to a report by The New York Times (NYT), “China on Friday updated its export control rules (the first time since 2008) to cover a variety of technologies it deemed sensitive, including technology that sounded much like TikTok’s personalized recommendation engine. Then on Saturday, the country’s official Xinhua news agency published commentary by a professor who said the new rule would mean that the video app’s parent, the Chinese internet giant ByteDance, might need a license to sell its technology to an American suitor.”
Essentially, China will need to approve the sale of certain companies that own technologies including data processing, speech, text recognition, and others. State-run news agency Xinhua has cited university professor and expert Cui Fan, who said TikTok falls under the revised law.
This news is huge, a clear response from Beijing that two can play this game. After all, the two superpowers have been locked in a trade war for over two years, an altercation that has only been exacerbated by the ongoing coronavirus pandemic. TikTok is just another battlefront for the two nations.
“Taken together, the rule change and the commentary in official media signaled China’s intention to dictate terms over a potential deal, though experts said it remained unclear whether the Chinese government would go as far as to sink it,” NYT commented.
China’s intervention fits the narrative published in a recent report by the South China Morning Post (SCMP), which indicated that acquisition talks for TikTok’s US operations are “unlikely” to end in a deal, citing a source involved with the matter. The person said the probability of Microsoft buying TikTok is “not higher than 20 per cent” since the initial price offered by the US software giant was akin to “robbing the owner when his house is on fire”.
China’s intervention also poses a major issue for President Donald Trump, who is seeking reelection in November. If China completely obstructs a sale attempt, Trump will be forced to go ahead with his ultimatum, blocking TikTok in the US starting from September 15. This bodes negatively for him in terms of his popularity with the general populace as well as the support from big corporations like Apple and Google that host the app on their digital stores.
On the other hand, “Beijing’s move could risk empowering the more hawkish members of Mr. Trump’s team and igniting an even more forceful response from the administration, which has said that it could take more measures to block tech companies like Alibaba and Baidu from doing business in the United States,” NYT posited.
TikTok to abide by the amended laws
For now, TikTok parent company ByteDance has confirmed that it will abide the by the updated laws put forward in its home country, which means the ball is in China’s court right now, dictating how the deal will proceed next.
“On Sunday, ByteDance responded saying that it has noted the amended export regulation and that ‘the company will strictly abide’ by the laws,” according to a CNBC translation of its statement.
“We are studying the new regulations that were released Friday. As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the US and China,” ByteDance General Counsel Erich Andersen said in a separate statement.
It is important to note TikTok remains an unprecedented triumph for the Chinese tech sector. In a world dominated by US tech firms like Microsoft, Apple, Google, and many others, TikTok is China’s horse in the race, and one it will not easily relinquish in the face of US pressure.
The US claims TikTok represents a national security threat with it spying on users, which the Chinese company has long denied.