China invokes new rules to block sale of TikTok
04 September 2020
China has recently amended its export control law that could potentially be used to block the sale of TikTok's US operations even as investors, including Japan’s SoftBank, are trying to save markets for the hugely popular mobile app.
TikTok owner Bytedance was in talks to sell TikTok's American operation following President Donald Trump's threat to ban the app if a suitor is not found. Bytedance, however, said it will 'strictly' comply with the new rules imposed by China.
China on Thursday emphasised its right to approve or block the sale of technology abroad, in a move to block a forced sale of TikTok’s US operations to investors, including Microsoft Corp and Oracle Corp.
Beijing’s posture will further complicate an already muddled negotiations over the sale of TikTok, which is already under scrutiny by the Trump administration.
The Chinese government last week added several artificial intelligence features to a list of export-restricted technologies, effectively gaining the right to block a deal by specifically targeting TikTok’s essential features like the recommendation algorithms.
Reports citing a Chinese commerce ministry spokesman said the regulatory changes aren’t targeted at specific companies, but to ensure that companies should consult relevant government agencies before transferring any technology they employ.
“If related enterprises are transferring technology abroad during trade, investment or technical cooperation that fall under the regulations, they are advised to immediately consult provincial-level commerce department offices and handle that in accordance with the law,” Gao Feng, spokesman for the ministry explained during a weekly briefing.
Meanwhile, SoftBank Group Corp, which owns a stake in TikTok’s Chinese parent ByteDance, has been holding talks with the heads of Reliance Jio Infocomm and Bharti Airtel, to find a suitor for TikTok’s Indian operations.
While discussions have fizzled since, SoftBank is still exploring options to revive TikTok’s now dormant operations in India, its largest market with over 200 million users, reports citing sources said.
Beijing’s move to bring in opaque laws to block transfer deals would only result in TikTok getting banned in the US and several other markets and perpetuate its India ban.
President Trump will most likely ban TikTok ahead of November’s election, further jeopardising any sale of TikTok.
ByteDance has been weighing several options, including sale of TikTok in several countries after governments there shut out the app, citing transfer of sensitive user data to Chinese state agencies.
US President Donald Trump restricted the use of TikTok and super app WeChat in early August, prohibiting the use of the two controversial apps by US entities after a 45 day phasing out period. The Trump administration wants TikTok banned because it could be used to extract data from Americans for the use of Chinese security agencies.
Many fear a forced sale of TikTok and an escalating tech war will lead to a splitting of the World Wide Web into a US-led internet and a Chinese-sponsored one.