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In a remote Himalayan valley on June 15, Chinese and Indian military troops engaged in a deadly clash over disputed territory that resulted in the deaths of 20 Indian soldiers and an undisclosed number of Chinese casualties.
By the end of the month, India, citing data security concerns, had banned 59 Chinese mobile apps, including the popular video platform TikTok.
Since then, officials in the U.S. and Australia have called for bans of the app over concerns that the Chinese government can access TikTok’s user data, since the app is owned by Beijing-based tech firm ByteDance Ltd.
Before the government ban, India was TikTok’s largest market with 81 million monthly active users (MAUs). The loss of the U.S. market and its 30 million MAUs would prove another huge blow.
TikTok is by far one of China’s most successful Internet exports, but its high-profile global presence has made it a bugbear for wariness of the Chinese government and a geopolitical hot potato. TikTok is attempting to distance itself from its owner, but growing global suspicion of Big Tech in general and of Chinese government influence in particular spell trouble for the app.
A geopolitical bugbear
President Donald Trump said on Tuesday the U.S. is considering a ban on TikTok, a day after Secretary of State Mike Pompeo said Americans should not use TikTok unless they want their data “in the hands of the Chinese Communist Party.”
Chinese foreign ministry spokesperson Zhao Lijian, in response to a question about the possible ban during a Wednesday press conference, said that “some people in the U.S.” should “stop employing state power to oppress Chinese companies.”
“The Chinese government always asks Chinese companies to observe laws and regulations when doing business overseas,” Zhao said. “If we follow the logic of the U.S. side, can we say that American social media companies, with a large number of users globally, pose a grave security threat to all other countries in the world?”
TikTok has been an object of scrutiny in the U.S. for months. The government launched a national security investigation of ByteDance in November, and later that month, Sen. Josh Hawley (R-Mo.) said TikTok was “compromised by the Chinese Communist Party.”
TikTok is not available for download in mainland China; ByteDance operates a China-only version of the app called Douyin within the mainland.
“TikTok is led by an American CEO, with hundreds of employees and key leaders across safety, security, product, and public policy here in the U.S.,” a company spokesperson told Bloomberg on Wednesday. “We have never provided user data to the Chinese government, nor would we do so if asked.”
Cybersecurity firm Check Point published research in January that found TikTok had security vulnerabilities that would have opened user data up to hackers. TikTok learned of the research in November 2019 and said it had fixed the vulnerabilities by Dec. 15 of that year.
Officials and activists have also criticized TikTok for allegedly censoring content deemed politically sensitive or controversial in China, including videos related to Tibet, Taiwan, and the 1989 Tiananmen Square protests. TikTok has denied the censorship allegations.
“Even though ByteDance has claimed that the operation of TikTok is separate from Douyin, some recent incidences seem to indicate that they’re still under pressure from Chinese censors,” said Yun Jiang, a researcher at the Australian Center on China in the World at the Australian National University.
TikTok collects users’ location, Internet address, and browsing history; it can also store phone numbers, age, and payment information if users opt in. The company told the Wall Street Journal it collects less personal data than U.S. companies like Facebook or Google.
“TikTok, like all social media companies, collects users’ data,” Jiang said. “There are concerns that because it is owned by a Chinese company, it will be difficult for the company to refuse information requests from the Chinese government.”
Such concerns, Jiang said, are similar to those leveled at Chinese telecom equipment giant Huawei Technologies in recent months. Several countries have banned Huawei networking equipment and Washington blacklisted the company in May 2019 after trade negotiations with China broke down.
Dev Lewis, a fellow at Hong Kong–based research think tank Digital Asia Hub, is wary of comparisons between TikTok and Huawei because the companies are so different: The former is a highly visible social media app with huge name recognition in the U.S., and the latter is a telecom equipment manufacturer that, despite being the second-biggest smartphone maker in the world, is largely unfamiliar to U.S. consumers.
“As long as trust in Beijing continues to fall, trust in any Chinese company will continue to decline, and so in that sense you can paint them in the same brush,” Lewis said.
This week, scrutiny of TikTok extended beyond India and the U.S. when Australian Sen. Jim Molan, deputy chair of Australia’s Foreign Interference Through Social Media Committee, said that TikTok may be “a data collection service disguised as social media,” and another official said Australia should ban TikTok and other Chinese apps. TikTok’s general manager in Australia told the Guardian that TikTok does not share data with foreign governments. Representatives for TikTok did not respond to Fortune’s requests for comment.
Part of TikTok’s susceptibility to government scrutiny is its immense popularity outside China—unprecedented for a Chinese app.
The Tencent Holdings–owned social platform WeChat is globally popular, but its user base is mostly limited to Chinese diaspora communities and people with business or research ties to China. TikTok, on the other hand, has spawned a lucrative influencer culture in the U.S.; the platform’s most popular faces are American teenagers with talent agency contracts, tens of millions of followers, and dating lives that make headlines.
“TikTok is really the first Chinese app that’s actually been embedded in local culture around the world,” Lewis said.
Lewis said the growing global skepticism toward Big Tech, set off by data security scandals and disinformation campaigns, contributes to government suspicion of TikTok.
“You really have this double trend of no trust, and fear of Beijing and what Beijing may do, plus general apprehension of how Internet companies govern,” Lewis said.
“Until TikTok, the U.S. has never had to deal with this problem—they’ve never had a foreign country with a successful app in their country,” Lewis added. “Most countries outside the U.S. have been dealing with this.” Countries like India “have been struggling with [these questions] for years,” he said.
Independence from ByteDance
In 2018, after the Chinese government criticized ByteDance-owned news aggregation app Jinri Toutiao for “vulgar content” and temporarily banned it from app stores, ByteDance’s billionaire founder Zhang Yiming issued a long public apology and said Toutiao would hire more staff for its internal censorship division.
Zhang’s pledge to comply with government content regulations is another reason behind the effort to assert TikTok’s functional independence from ByteDance. Senior ByteDance executives are considering setting up a headquarters for TikTok outside China and creating a new management board for the app, the Wall Street Journal reported on Thursday.
TikTok’s chief executive, Kevin Mayer, is an American who left a senior role at Disney in May to lead the short video app. Mayer is also chief operating officer of ByteDance and lives in Los Angeles but travels frequently to Beijing.
TikTok withdrew from the Hong Kong market this week after Beijing enacted a sweeping national security law in Hong Kong under which authorities can demand tech firms provide user data and remove content.
Lewis said the withdrawal was “a direct result of the national security law” and a signal to the global market that TikTok is “truly separate from Beijing; that [TikTok is] not going to be holding servers in areas and jurisdictions where Beijing can request data.”
Hong Kong is a small, money-losing market for the platform. The decision means Google and Apple app stores will no longer offer TikTok to Hong Kong users. Users who previously downloaded the app are no longer able to access it. On Thursday evening in Hong Kong, users who opened the mobile app received a pop-up that said, “We regret to inform you that we have discontinued operating TikTok in Hong Kong.” The home page was a black screen.
Lewis said it’s unlikely that TikTok’s decision to pull out of Hong Kong will assuage the concerns voiced by the governments of India, Australia, and the U.S.
ByteDance forecasts a loss of more than $6 billion resulting from the India ban, which restricted TikTok and two other ByteDance apps, Chinese business magazine Caixin reported. ByteDance—considered the world’s most valuable startup—generated $17 billion in revenue and $3 billion in net profit last year.
TikTok on Wednesday debuted a new advertising platform focused on small businesses; the global political controversy around TikTok is expected to be a challenge to the success of the launch. ByteDance earned $5.6 billion in revenue in the first quarter of 2020 through ad sales mostly from Douyin, its mainland China app, Reuters reported.
“The only solution” that might ease suspicions of Chinese government involvement in the app would be if ByteDance sells TikTok to another company “that’s considered acceptable to the U.S. or other major markets,” Lewis said.
India’s decision to ban TikTok may “start a precedent for democratic countries,” Lewis said, and U.S. and Australian bans of the app are “very much in the realm of possibility.”
He added that Europe may soon be TikTok’s “friendliest market,” in part because the European Union’s General Data Protection Regulation (GDPR) protects European users’ data and gives companies like TikTok clear rules of conduct, unlike the U.S. or India, which do not have GDPR-like protections.
Otherwise, Lewis said, as long as geopolitical tensions between China and other countries continue to rise, “TikTok will undoubtedly be caught in the middle.”
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