The government’s relationship with the social media behemoth, which is making a concerted effort to separate itself from Beijing authorities, is made plain by China’s declaration that it would “seriously oppose” a forced sale of TikTok.
The Chinese rule on tech exports, which necessitates licenses for the export of specific technology due to national security concerns, is claimed to apply to the sale or spinoff of TikTok from its Beijing-based parent company ByteDance. This was stated on Thursday by the Ministry of Commerce. The popular Chinese equivalent of TikTok, Douyin, is also owned by ByteDance.
“The Chinese government would make a decision in accordance with law,” said spokesperson Shu Jueting in Chinese, translated by CNBC.
Hours before TikTok CEO Shou Zi Chew’s appearance before a U.S. House of Representatives committee, Shu was giving his remarks at the ministry’s weekly press conference.
For more than five hours, lawmakers grilled Chew about TikTok’s ability to function independently of Chinese influences on its parent company.
A request for comment regarding the statements made by the Chinese Commerce Ministry was not immediately answered by ByteDance.
Congressmen in the US didn’t seem relieved by the questions.
“At the end of the day, it was clear from the testimony that Mr. Chew reports to the CEO of ByteDance. ByteDance controls TikTok,” Cameron Kelly, visiting fellow at Brookings Institution, told CNBC’s “Squawk Box Asia” Friday. Kelly used to be a general counsel at the U.S. Department of Commerce from 2009 to 2013.
According to Kelly, the data demonstrating ByteDance’s legal ownership over TikTok raises questions about how effectively the service can demonstrate its independence through restructuring.
To prove that mainland Chinese authorities cannot access American user data, TikTok has a “Project Texas” plan to store it on American territory.
“I don’t think a shutdown a ban or a complete divestiture [of TikTok] is needed. But I do think you have to separate that legal control,” said Kelly, noting that could be done through a trust structure.
China wants to be engaged, as seen by the trade ministry’s assertion of control over any TikTok sale or spinoff.
“The Chinese government’s public declaration that it would block the sale of TikTok in the U.S. has little to do with protection of Chinese algorithms and technology and a lot to do with giving Washington a taste of its own medicine,” Daniel Russel, vice president for international security and diplomacy, Asia Society Policy Institute, said in a statement.
“Beijing, having heard [U.S. Commerce] Secretary Raymond’s lament that banning TikTok would infuriate voters under 35, is now double-daring Congress and the Administration to ‘make my day,’” Russel said.
The U.S. has tightened limits on American companies’ and people’ ability to collaborate with Chinese companies on vital technology for high-end semiconductors.
The CEO of TikTok said that the app is based in Los Angeles and isn’t accessible in mainland China when questioned about the remarks made by the commerce ministry on Thursday. However, he claimed that the business had utilized some of the knowledge of ByteDance’s Chinese employees on “technical initiatives.”
Additionally, Chew informed American lawmakers that although certain U.S. data may still be accessible to ByteDance workers working in China, new data will no longer be added once the company has finished its Project Texas plan.
China’s government has repeatedly underlined that when conducting business abroad, Chinese corporations must abide by local rules and regulations.
It’s not immediately obvious how TikTok would be affected by China’s export control regulation, which was passed in December 2020.
According to the EU Chamber of Commerce in China’s most recent position paper, several government entities are in charge of managing different export kinds, and “each of them has a separate regulatory regime.” It demanded more explanation of the functions played by the various organizations charged with carrying out the export control law.
China and the U.S. have cited national security as justification for limiting technology more frequently.
“To be fair, there really are indeed genuine national security risks associated with [TikTok] — and that is one reason why a ban of the app from government phones and military phones makes sense,” said Glenn Gerstell, senior advisor at Center for Strategic and International Studies on CNBC’s “Street Signs Asia” Friday. Gerstell was general counsel of the National Security Agency from 2015 to 2020.
“As to the general public, I don’t see the strategic value in China understanding what the dance moves of a teenager in Minneapolis are. So the general public ban doesn’t make sense to me,” he said.
More than 150 million users, or over half the country’s population, use TikTok in the United States.
It’s uncertain if the U.S. will eventually compel ByteDance to sell TikTok or forbid its use in the nation. Federal government devices are already prohibited from using the enormously popular software.
“We see a 3-6 month period ahead for ByteDance and TikTok to work out a sale to a US tech player with a spin-off less likely and extremely complex to pull off,” Dan Ives, analyst at Wedbush Securities, said in a note.
“If ByteDance fights against this forced sale, TikTok will likely be banned in the US by late 2023.”
(Adapted from USToday.news)
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