How Trump’s TikTok ban pushed China’s most independent tech billionaire closer to Beijing
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The clock is ticking for TikTok, the wildly popular short-video app, and the founder of its parent company, 38-year-old Chinese billionaire Zhang Yiming.
Zhang, a programming prodigy, has long been regarded as China’s most independent, if elusive, tech tycoon. Unlike Alibaba Group’s flamboyant founder Jack Ma, Zhang shuns the limelight, rarely travels abroad, and is not a member of China’s ruling Communist Party.
Last year, when TikTok ran into a political scrape in India, Zhang turned down an invitation to meet with Chinese government leaders offering help, according to Reuters. Instead, he sent mid-level emissaries to assure the solicitous officials his company would sort things on its own.
But now Donald Trump is pushing Zhang into Beijing’s protective embrace.
TikTok’s Trump troubles began Aug. 1, when the president abruptly announced that he intended to ban the app from conducting business in the United States on the grounds that it hoovers up the personal data of millions of Americans. White House officials warned that the app posed a national security threat because, if ordered to do so, TikTok’s parent company, Beijing-based ByteDance, would surrender that data to China’s communist rulers.
TikTok dismissed that suggestion as absurd. Never mind that its primary content is teenage dance videos. Spokespeople stressed that the company was an independent U.S. subsidiary with an American CEO and chief information security officer and servers in Virginia. “We have no higher priority than promoting a safe and secure app experience for our users,” a spokesperson said. “We have never provided user data to the Chinese government, nor would we do so if asked.”
Trump budged, but barely. On Aug. 3, he announced that he would allow TikTok to continue operating in the U.S. if ByteDance could sell the company to American investors by Sept. 15—and, he added, he expected the U.S. Treasury to get a cut of the sale.
TikTok responded by beginning negotiations with potential buyers, the most likely of included Oracle and a rival alliance of Microsoft and Walmart. At the same time, the company filed a federal lawsuit against the ban.
Later in August, Trump signed two executive orders that ultimately extended the deadline for a sale to Nov. 12, just after the U.S. presidential election. Now, Bytedance is reportedly in talks with the U.S. government to avoid a full sale of TikTok’s U.S. operations.
My colleague Adam Lashinsky has opined eloquently in Data Sheet about the shameful and inexplicable eagerness of American companies, who have long complained about China’s brazen theft of American intellectual property, to cash in on a thinly veiled political shakedown. At the very least, a forced sale would compensate Zhang for the business he built. Prices for a potential deal have ranged from $20 billion to $50 billion. But getting a deal of that magnitude done, even by the extended deadline, will be a monumental endeavor.
In China, Zhang has been attacked online as a traitor for even contemplating the possibility of “selling out” to foreigners. Some have compared him unfavorably to Ren Zhengfei, CEO of China’s largest telecommunications manufacturer Huawei, who’s struck a defiant tone in the face of U.S. pressure.
And, if Zhang’s situation weren’t complicated enough, on Aug. 28, the Chinese government stepped into the fray by announcing it had updated and expanded export controls to artificial intelligence technology, a move many experts said could force the sale of TikTok in a form that would make the company far less attractive to buyers—or possibly prevent the sale entirely.
Ostensibly, Beijing’s announcement sends a message to Washington that it will stand up for private Chinese companies. “We want to show all other countries that this is what the Chinese government will do if you bully any of our companies,” a Chinese government source told Reuters.
But it is increasingly evident to Zhang and other Chinese entrepreneurs that there is no one to save them from bullying by their own government. Two days after China’s announcement on export controls, ByteDance issued a contrite pledge to “strictly follow” the new rules.
Paul Triolo, head of Eurasia Group geo-technology practice, shares his insights on U.S.-China tech tensions in this week’s Eastworld Spotlight video conversation. Paul, who is co-author of a fascinating recent report on the “Geopolitics of Semiconductors,” argues that the Trump administration’s latest round of restrictions on the export U.S. chip manufacturing technology is accelerating the division of global technology supply chains into “red chains” and “blue chains”—and pose a potentially existential threat to Huawei.
One other note. In few hours, I’ll host an online conversation with three distinguished Chinese researchers about the global race to develop a vaccine for COVID-19. It’s free, and there is still time to sign up and join us here.
More Eastworld news below.
This edition of Eastworld was curated and produced by Grady McGregor. Reach him at email@example.com.
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