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Beijing ratchets up TikTok tension

August 31, 2020, 10:11 AM UTC

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Good morning. David Meyer here in Berlin, filling in for Alan.

In case the forced sale of TikTok’s western operations wasn’t sufficiently packed with intrigue, Beijing has stirred things up further.

China’s government has introduced new rules around the export of certain types of technology, such as “artificial intelligence” interfaces and speech recognition. ByteDance’s popular short-video app uses these technologies, and ByteDance will therefore have to ask for China’s approval before selling off TikTok’s U.S. operations to Microsoft/Walmart or Oracle or whoever is jumping into the ring this week.

According to Bloomberg, ByteDance says it will “strictly comply” with Beijing’s demands in this respect. The publication also quotes a “person familiar with the matter” as saying China’s newly-revised export-control list represents an attempt not to block the sale, but rather to delay it—perhaps until after the U.S. election in November.

Although the impact is not quite the same, the development is reminiscent of the U.S.’s deployment of export-control laws to target Huawei and its suppliers. That’s about national security, and China’s potentially-TikTok-sale-stymying move is apparently about national economic security, but each appears to amount at least in part to one side of the Sino-American spat messing with the other, with a fast-growing company getting stuck in the middle.

The mixture of business and geopolitics may make for exciting sagas, but it’s a dangerous game. Let’s hope it doesn’t become a regular event.

More news below, starting with another example of the syndrome we’ve just discussed…

David Meyer
@superglaze

david.meyer@fortune.com

TOP NEWS

Forced sale

The American hotel operator MCR Development has agreed to buy the hotel property-management software firm StayNTouch for $46 million, after President Trump said StayNTouch's Chinese ownership (by Beijing Shiji Information Technology Co.) was a threat to U.S. national security. MCR Development reportedly does not plan any major operational changes at the company. Wall Street Journal

Nestlé buy

Nestlé Health Science is to buy out the Californian biopharmaceutical company Aimmune at a valuation of $2.6 billion. Nestlé had already invested $473 million in the company, which makes a treatment called Palforzia, for peanut allergies in children and teens. Aimmune got FDA approval for Palforzia in January. CNBC

Wirecard probe

A parliamentary inquiry into the accounting scandal at Wirecard kicks off in Berlin today. The big question is whether German officials were so keen to foster the growth of a national champion that they ignored worrying signs that all was not well. Bloomberg

Change fees

United has become the first U.S. airline to permanently scrap the $200 fees it charged for changing domestic tickets. The move comes as it, and other carriers, try to coax passengers back onboard in the context of a still-festering pandemic. Fortune

AROUND THE WATER COOLER

Tesla analysis

Fortune's Shawn Tully has a question for prospective Tesla investors: "Over the next several years, what's the valuation Tesla must achieve to reward them for shouldering the heavy risk of buying its shares right now?" He comes to the conclusion that the necessary volumes are impossible for Tesla, "given the current size and projected growth of the industry…It's not that Tesla can't be successful. The killer is that its bubble valuation mandates future performance that simply looks unachievable." Fortune

Naspers analysis

It's now a year since Naspers, the South African media giant, unbundled its new-media holdings (the big one of which is its 31% Tencent stake) in the form of Prosus. So, did it work? This analysis argues that the unbundling did not achieve its desired effect of narrowing the discounts between Naspers and Prosus, and between Prosus and Tencent. Business Maverick

Abenomics review

The surprise premature departure of Japanese Prime Minister Shinzo Abe will nominally end his "Abenomics" approach to reviving the Japanese economy. Reuters polled experts for their opinions on the strategy and whether it worked. Opinions, unsurprisingly, differ. Reuters

Electric cars

New research shows that European auto firms will find it more expensive to build electric cars than fossil-fuel cars for at least the next decade. It seems that, by 2030, there will still be a 9% gap in production costs that threatens the profit margins of companies such as Volkswagen and PSA. Financial Times

This edition of CEO Daily was edited by David Meyer.