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The Trump administration came to the conclusion that TikTok, owned by Chinese tech firm ByteDance, is a threat to US national security and has threatened to ban it in the US unless it is sold to a US company or consortium. Photo: AFP

Economy

Global Impact newsletter: TikTok’s clock is ticking in the US

Global Impact is a fortnightly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world
In the ninth edition we will be looking at the Trump administration’s efforts to clamp down on Chinese-controlled apps on national security grounds

TikTok

John Carter

Published: 2:00pm, 5 Oct, 2020

Why you can trust SCMP

The power of TikTok came to the attention of the older generation, like me, in June when its mostly young users used the short video app to sabotage the first big campaign rally by US President Donald Trump after the coronavirus pandemic. Thousands of users banded together to request tickets to the event in Tulsa, Oklahoma, then didn’t show up. Only 6,200 attended in a venue that holds 19,000, a major embarrassment for the Trump campaign.

But even before the Tulsa rally focused a spotlight on the power of the app and its Generation Z user base, TikTok was a big deal, as this story explains. The company says it has over 100 million users in the US, 60 per cent of whom are between the ages of 18 and 24, who love to share dance moves, stupid pet tricks and comedy, and increasingly, more serious topics.

But amid rapidly worsening relations between China and the US, first Congress, and then the White House, took aim at what they perceived to be national security threats from Chinese-controlled apps. And the US was not alone. Australia, South Korea and other nations increased their scrutiny of TikTok and India banned it and 58 other apps entirely after the border clash in mid-June.

The Trump administration came to the conclusion that TikTok, owned by Chinese tech firm ByteDance, is a threat to US national security and has threatened to ban it in the US unless it is sold to a US company or consortium.

That set off a bidding war for TikTok’s US operations that reads like a spy novel.

01:42

K-pop fans and TikTok teens troll Trump with fake registrations for first campaign rally in months

Early on, software giant Microsoft emerged as a potential buyer of TikTok’s US operations in an effort to expand its online presence. Walmart, the world’s largest retailer, later joined that bid in order to further its e-commerce ambitions. Later, business software firm Oracle threw its hat into the ring, teaming up with several of the venture capital investors who already owned stakes in TikTok.

The highly public possibility of a take-down of TikTok was a major embarrassment to Beijing, so the Chinese government then threw a spanner in the works, issuing new rules that banned the export of any sensitive technology without a special license. This prohibited the sale of the algorithms that power the TikTok app, giving Beijing effective veto power over any transactions and made a quick sale much less likely. TikTok then turned around and told potential buyers that the algorithms were not for sale.

Undaunted, the Oracle-led consortium cobbled together a “technical partnership” with TikTok that ByteDance accepted over Microsoft’s bid, but which fell short of Trump’s original demand for a full-fledged sale.

Why TikTok became the fastest growing app, and how fashion and beauty brands have embraced its Gen Z vibe

After some fine-tuning of the Oracle deal, including a promise that the new US firm, TikTok Global, would list in the US, Trump initially gave it his blessing. Then confusion took over.

ByteDance, under pressure from Beijing, said it would retain majority control of TikTok Global, while Oracle said US investors would own the lion’s share of the new business. Trump’s approval of the deal evaporated and Beijing started sending out smoke signals through the official press that it also opposed the deal.

Trump’s initial effort to ban the downloading of TikTok from US app stores was blocked by a US judge, who argued the president had overstepped his national security authority. But experts warned to expect continued White House pressure on TikTok to close a sales deal that ensured US control over the company and its app.

The deal’s future remains in limbo as of this writing.

60 second catch-up

Explainer: Here’s what you need to know about Oracle’s deal to buy TikTok in the US from China’s ByteDance

06:02

Global expansion of TikTok and other Chinese tech companies is likely, only not in the West

Deep Dives

TikTok US sale gives Trump more legal stranglehold on ByteDance: analysts

TikTok is famous for its AI-powered recommendation system, which feeds curated content to users based on their interests
The US market is a bellwether for others, with user habits there followed in other countries

ByteDance has been forced into a corner by the Trump administration, which now says it must sell the US version of its global short video hit TikTok within 90 days if the app wants to stay in business – and there is much at stake.

Analysts say not only is the US market a bellwether for the Chinese internet company’s global ambitions, pulling off a sale is easier said than done due to a complex array of legal and technical obstacles.

Read the full story here.

01:04

Pompeo says US considering ban on TikTok and other Chinese apps, praises Google, Facebook, Twitter

As US broadens TikTok battle, tech firms such as WeChat and Zoom might have to pick sides

The Trump administration is making concerted efforts to hamstring all tech firms associated with China for fear they could divert American data to Beijing
Forcing ByteDance’s short-video app out of the US market could set a painful precedent for other Chinese technology companies

As the Trump administration tries to force Chinese-owned video-sharing app TikTok to sell its US business, other tech companies associated with China may be forced to choose sides.

US President Donald Trump said on Monday that he was setting a 45-day deadline for ByteDance to sell TikTok to an American owner such as Microsoft before he bans the app from the US. Beijing decried the move, accusing the US of “hypocrisy”, and a state media editorial has likened it to “forcibly taking the child out of ByteDance’s arms”.

Read the full story here.

Pompeo urges US app stores to remove ‘untrusted’ Chinese-owned apps

The call, aimed at Apple and Google, to remove the apps marks a new prong in the administration’s expanded ‘clean network’ campaign
Pompeo offered few details on how such efforts will be carried out, and gave no indication that the guidance was in any way binding

Washington’s top diplomat urged US app stores to remove “untrusted” Chinese-owned apps – including TikTok and messaging app WeChat – on Wednesday, amid escalating efforts by the Trump administration to counter the reach of Chinese-made technology in the United States.

US Secretary of State Mike Pompeo’s call – aimed at Apple and Google – to remove the apps marks a new prong in the administration’s expanded “clean network” campaign, which had initially focused on pushing countries to ban Chinese vendors from 5G networks.

Read the full story here.

Global Impact is a fortnightly curated newsletter featuring a news topic originating in China with a significant macro impact for our newsreaders around the world.

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