TikTok Sale in the U.S. gets Opposition from China
As potential purchasers line up to bid on TikTok’s U.S. operations, the Chinese government has sent a message that it will not tolerate a forced sale of the app, leaving the owners of the service with few choices.
Chinese authorities have voiced their disapproval of American efforts to crack down on the popular video-sharing software. They have also communicated with Beijing-based ByteDance, the owner of TikTok, in a way that business officials have taken to suggest that the government would prefer to see the app banned in the US rather than sold, according to those familiar with the situation.
Because of this, ByteDance is in a tough spot, and TikTok is facing its worst danger to date in the United States, its largest market with 170 million subscribers.
House members unanimously approved a measure on Wednesday that would have ByteDance sell over TikTok or face a ban. The lawmakers’ reasoning was that the company’s owners were collecting user data from Americans, which they saw as a threat to national security. Despite demands from Beijing, TikTok has stated that it will not disclose the data with the Chinese government.
In the Senate, whose members have shown signs of being more cautious, the measure is headed for a fight. If a measure were to reach President Biden’s desk, he would sign it, according to his statements.
A representative from China’s Ministry of Commerce stated at a regular news conference on Thursday that the United States should “stop unreasonably suppressing” TikTok and that “the relevant party should strictly abide by Chinese laws and regulations.”
The response was interpreted by some ByteDance executives as further confirmation from Beijing that the company will encounter regulatory obstacles in its attempt to offload TikTok, according to the sources. China issued a warning last year that any move to sell or divest TikTok would necessitate the export of technology and would require official approval.
According to sources acquainted with the subject, ByteDance founder Zhang Yiming, who has a substantial investment in the company, has not indicated that he is in talks with outside parties regarding selling his shares in TikTok.
Thursday, former Treasury Secretary Steven Mnuchin announced his plans to form a consortium in an effort to acquire TikTok. According to the Wall Street Journal, former Activision CEO Bobby Kotick has reportedly reached out to Zhang.
All estimates put the price tag at over $100 billion. According to those acquainted with the subject, TikTok has not turned a profit despite having approximately $20 billion in revenue last year.
After overcoming multiple regulatory hurdles, TikTok is once again caught in the middle of geopolitical tensions between China and the United States. Former President Trump sought to outright prohibit the app in 2020 through an executive order, but the courts struck it down.
Since then, TikTok has been battling to execute an operation under the codename Project Texas in order to secure user data from American users. The company’s leadership had held the firm belief that it could negotiate an operating agreement with US regulators. However, the CEO has been called before Congress twice in the last year due to the increased scrutiny. Another state that has outlawed the app is Montana, a decision that TikTok is challenging in court.
According to OpenSecrets, a nonpartisan platform that tracks political spending, ByteDance’s spending on lobbying activities in the US increased by 77% to $8.74 million last year. Since the legislation is anticipated to have a more challenging path in the Senate compared to the House, the lobbying efforts have shifted their focus there.
China, which has been the world’s factory floor for decades but has failed to establish its own tech companies, views the worldwide success of TikTok as an unusual victory.
Tech policy analyst Tom Nunlist of the Shanghai-based consulting firm Trivium China stated that Beijing officials saw the measure as an effort to steal this valuable asset and will not tolerate it.
Chinese state media and the Chinese internet lauded TikTok’s aggressive campaign to urge American users to contact their congressional representatives to voice their disapproval of the measure, while the campaign provoked a backlash in the US. Over the weekend, the hashtag #TikTokUsersBombardUS CongressOfficesWithCalls became popular on Weibo, a social media platform similar to X in China.
Some Weibo users compared the US effort to coerce a sale to theft and urged ByteDance to take a stronger stance in response.
According to one user, TikTok was just as innocent as Huawei. The United States has imposed limitations on Huawei Technologies, a telecoms giant, for years on the grounds that the company may share sensitive information with the Chinese government. Huawei disputes the charges.
On the other hand, several Weibo users saw parallels between the potential U.S. ban on TikTok and the Chinese bans on Facebook and X. In China, where ByteDance has the sister app Douyin—which is censored by the Communist Party but utilizes a similar algorithm to promote content—TikTok is likewise unavailable.
The ban on TikTok in the US would lead to similar measures against Chinese enterprises on the basis of national security, according to Trivium’s Nunlist.
Last month, President Biden issued an executive order mandating the launch of a probe into foreign-manufactured software in automobiles. He made the case that Chinese technology posed a threat to national security.
Legislators and the Biden administration will be under pressure to remove TikTok because to the political consequences if ByteDance insists on shutting down the service instead of relinquishing control. In a Sunday essay published by the nationalist tabloid, Hu Xijin—a former chief editor of the Communist Party-backed Global Times—wrote.
In 2020, when the Trump administration was urging China to sell its U.S. operations, it added content-recommendation algorithms on an export-control list, giving China a say in any TikTok sale. These algorithms are the secret sauce of TikTok’s success.
The leaders of China will most likely put the honor of their country ahead of ByteDance’s bottom line. Thursday, Teneo’s managing director and chief advisor Gabriel Wildau addressed a note to clients.
With its increased attempts to engage consumers and businesses in the US, TikTok may have a stronger position there. This, according to experts and company officials, might make a ban more difficult to implement. On Super Bowl Sunday, the Biden campaign became an app user.
With 3.8 million followers, TikTok CEO Shou Zi Chew’s personal account has seen increased posting frequency. The U.S. version of TikTok Shop, the company’s e-commerce platform, launched in September, and there are currently about 200,000 sellers on the platform.
It also has formidable competition from other, more well-known platforms that offer similar features, such as Instagram’s Reels and YouTube Shorts.
