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The sudden escalation of U.S. national security warnings over TikTok, followed by President Trump sanctioning acquisition negotiations between Microsoft and ByteDance, have now become something of a pantomime.
The latest twists over the weekend saw Microsoft close in on TikTok’s U.S. business, before Trump’s Friday night warning that a ban was imminent and a deal not supported. A day or so later, though, and Microsoft confirmed its intent to acquire and Trump confirmed his approval, giving the parties until September 15 to agree terms. Trump even demanded a cut for the U.S. Treasury.
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China has now responded with seeming fury. The China Daily, the mouthpiece for the ruling CCP, warned on August 4 that Beijing “will by no means accept the ‘theft’ of a Chinese technology company, and it has plenty of ways to respond if the administration carries out its planned smash and grab.”
The newspaper slammed U.S. tactics to raise tensions by threatening punitive action, “all with the aim of getting what the U.S. administration wants.” The newspaper described this as the “bullying of Chinese tech companies,” which it said “stems from data being the new source of wealth.” Those warnings have made worldwide headlines—but it might all be misleading.
There was another paragraph in the China Daily’s editorial which could be more telling: “Washington is well aware,” it said, “that Beijing will be cautious about retaliating like-for-like as it values foreign investment in China, and the sizeable U.S. investment in China is of more importance to the Chinese economy than the much smaller and shrinking Chinese investment is to the U.S. economy.”
One can read this as a message that China will not attack U.S. technology interests in retaliation. TikTok is no Huawei, the Financial Times commented on August 3. There is no particularly strategic technology gain in hundreds of millions of Americans and Europeans sharing video clips. There’s no generational technology implementation the world over that will cost billions to rip and replace, which cements China’s lead in something as critical as 5G.
TikTok’s importance is that is has broken a glass ceiling for Chinese social media apps to compete head-to-head with U.S. giants on their own turf. It’s important because the platform has nailed a viral video recipe that is beating Instagram, Snapchat and YouTube in their own backyard. Both TikTok’s growth and its likely demise as an exported Chinese platform set precedents for the future.
There will be repercussions for Chinese technology startups, for the investment community planning their growth strategies and exits. The U.S. will need to decide what this means for future Chinese exports—where’s the line. How does it now deal with other major platforms, WeChat for example, that it has intimated carry the same issues it claims of TikTok.
In the short-term, though, ByteDance might be more isolated than one would think, fighting the U.S. for its continued independence to operate TikTok around the world. And here there was also a message in the China Daily for the company’s founder after his reported reluctance to divest to Microsoft or anyone else. “Selling its U.S. operations to Microsoft might be preferable for TikTok’s parent company in China,” the China Daily commented, “as it is working ‘for the best outcome’.” Straight from the CCP.
ByteDance wants to assuage U.S. security concerns—but that’s not going to be possible given the political fight it has now been caught within. TikTok is not a risk to national security—at least not in the way it has been painted. It is not stealing data, spying on users or sending petabytes of information back to Beijing. It is competing head-on with Facebook, Snapchat and YouTube, and it’s currently no more a data threat than those other platforms.
TikTok is Chinese-owned, though, and that’s not nothing. China is an adversarial state to the U.S. The Beijing government can exert influence over ByteDance, domiciled within its country and subject to its laws. We saw that implied by TikTok’s exit from Hong Kong over its new national security law.
The U.S. and others should worry that TikTok is used by so many of their citizens, not because of the data captured today but because it’s an information platform that can theoretically be abused, and because there’s no telling how it might evolve in the future.
“Most people in China would laugh at the idea that ByteDance works closely with the Chinese government,” one Chinese technology exec with some inside knowledge of the company told the Financial Times.
This gets to the crux of the issue here. The allegations laid at Huawei’s door, that it was a conduit for data collection, that it provided an inside link into secure and critical data worldwide, were unproven but serious nonetheless. TikTok does not carry any of those same risks. It’s much easier to track the data flowing from a standard app on a standard phone. And TikTok can always be blocked at a moment’s notice. Harder to do that with a 5G network.
None of this will change the unfolding narrative—albeit it’s no dead cert that TikTok in whole or part will be traded to Microsoft. But what is seemingly clear is that ByteDance does not enjoy the same all-out support in Beijing that Huawei has used to good effect, with political influence exercised around the world. And that will be a telling factor in what happens next.