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Chinese government announces new rules that will hinder sale of TikTok US

By | Published on Tuesday 1 September 2020


The Chinese government has kindly provided an extra complication in the ongoing talks to sell the TikTok business in the US and some other markets. On Friday, it updated its list of export restrictions, with the export and cross-border sale of a number of technologies now subject to extra regulation in China, including “interactive interfaces powered by artificial intelligence” and “personalised recommendations and notifications powered by data analysis”.

TikTok’s Chinese owner Bytedance is busy negotiating with possible bidders about selling the app business within the US and some other markets too, likely to include Canada, Australia and New Zealand, and possibly even India.

The sale, of course, is all about trying to placate politicians in the US, and elsewhere, who have expressed concerns about the super popular app being owned by a China-based business, mainly because of allegations – disputed by Bytedance – that the Chinese government has access to TikTok’s global audience and user data.

The need to sell at least the US side of the TikTok business is now pretty urgent because of an executive order from President Donald Trump banning use of the app within America from 15 Sep on national security grounds. Bytedance’s lawyers are busy fighting that executive order in the courts, though an easier fix would be to have an American company in control of TikTok’s American operations.

There is plenty of interest in buying TikTok’s American business, though getting a deal done is still a challenge. Partly because of further meddling by the Trump government; partly because of tricky questions regarding how a global app owned by different companies in different countries would actually work; and partly because Bytedance wants there to be sufficient competition in the bidding process to overcome the risk of Trump’s unmovable deadline negatively impacting on price.

The Chinese government’s updating of its export restrictions list on Friday adds an extra complication. Given the TikTok app contains some of the technologies that have been newly restricted – and selling the app without those technologies included would be messy – it means any deal with an American buyer will now be subject to extra regulatory measures in Bytedance’s home country.

There was plenty of debate over the weekend over why the Chinese government updated its export restrictions list in the way it did and exactly what it means for the sale of TikTok in the US.

Trump’s moves against TikTok have been criticised by some in China, as has Bytedance’s willingness to sell its American business to placate Western politicians. Therefore last week’s new export restrictions could be a political move by Chinese leaders, so that they are seen to be responding to public opinion on the proposed forced sale of TikTok US.

Whether the Chinese government would go so far as to use the new powers to actually block any sale, potentially resulted in a further escalation of the country’s trade war with the US, remains to be seen.

Responding to the new regulations, a legal rep for Bytedance, Erich Andersen, told reporters: “We are studying the new regulations that were released Friday. As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the US and China”.

Meanwhile, back in the US, late last week it was revealed that TikTok rival Triller was teaming up with London-based Centricus Asset Management in order to enter the bidding to buy its competitor’s American business. In fact, according to reports, Triller and Centricus are interested in acquiring TikTok in the US, Australia and New Zealand, as well as India, where politicians have also banned the app.

That puts them into competition with the bid being made by Microsoft and Walmart, and another from a consortium led by technology firm Oracle. Or it does in theory. Yesterday, TikTok itself insisted it was not in talks with Triller about any sale. A spokesperson told CNBC: “We can confirm that we are not and will not be in talks with them. Still, we are flattered by how much they admire TikTok”.

Nevertheless, Triller’s Executive Chairman Bobby Sarnevesht told CNBC’s ‘Squawk Box Asia’ programme: “We have confirmation that the chairman [Zhang Yiming] and people pretty high up at ByteDance are aware of it and we have correspondence [on]going”.

So there go. There’s never a dull moment on Planet TikTok.