By Manskar
China appears to be wrapping TikTok in red tape in an effort to thwart President Trump’s order to divest the video-sharing app’s US operations from its Chinese parent company by mid-November or see it shut down.
The Chinese Ministry of Commerce added 23 items Friday to a list of technologies that require Beijing’s OK before they can be exported. They reportedly include artificial-intelligence technology that plays a key role for TikTok, which uses an algorithm to feed users a stream of videos based on their preferences and behavior.
That means TikTok’s Beijing-based parent company, ByteDance, will likely have to go through the new licensing procedure to transfer its software code out of China to the US as part of any sale, according to Wedbush Securities analyst Daniel Ives.
“This is clearly directed at slowing down ByteDance’s deal negotiations in this game of high stakes poker,” Ives said in a Monday note.
The move forced ByteDance to parse the new regulations over the weekend, when it was expected to start exclusive negotiations with one of the suitors for TikTok, the Wall Street Journal reported Sunday. Nevertheless, CNBC reported Monday that TikTok had chosen a buyer for its businesses in the US, New Zealand and Australia and could announce a deal as soon as Tuesday.
A joint bid from Microsoft and Walmart is considered the leading contender, but other suitors reportedly include software giant Oracle and rival video app Triller, which claimed Friday that it had made a $20 billion bid with Centricus Asset Management. ByteDance denied that it had been in talks with Triller.
“We are studying the new regulations that were released Friday,” ByteDance general counsel Erich Andersen told. “As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the US and China.”
Shares in TikTok’s suitors tumbled Monday on news of the potential regulatory hurdle. Microsoft’s were down 1.5 percent at $225.35 as of 1:13 p.m., while Walmart’s slid 2.2 percent to $137.18 and Oracle’s were off about 1 percent at $57.32.
China’s new rules added another geopolitical dimension to TikTok’s blockbuster negotiations. Trump has threatened to ban the app amid concerns that Americans’ user data could be shared with Beijing, charges that TikTok has denied.
Trump issued an executive order Aug. 14 giving ByteDance 90 days to divest TikTok’s US operations.
China’s state-backed Xinhua news agency published an article Sunday claiming ByteDance will have to follow the export rules to sell TikTok’s US operations, a process that kicked off after Trump signed an executive order banning the app on privacy concerns. Trump and other US officials have raised fears that Beijing-based parent ByteDance could share users’ data with China’s government.
The agency added that the development of ByteDance’s international businesses “has been built on the strong technical support based in China.”
“It is suggested that ByteDance carefully study the revised catalogue, seriously and carefully consider whether it is necessary to suspend substantive negotiations on relevant transactions, comply with statutory application and reporting procedures, and then take further actions as appropriate,” Cui Fan, a professor at China’s University of International Business and Economics, told Xinhua.
