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Chinese officials weighing whether to approve or nullify a deal to make TikTok a US-based company are eager to ensure that the Chinese owner of the short video app maintains control over its global operations and that the TikTok source code remains secret.
TikTok’s parent ByteDance Ltd. said on Thursday that it had presented its plan, which involves a partnership with Oracle, to Chinese authorities. Corp.
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and Walmart Inc.
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Much uncertainty still surrounds the proposed agreement on both sides of the Pacific; Chinese state media have criticized it as “dirty and unfair.”
Officials at China’s Ministry of Commerce have carefully studied US media reports on the deal and have been concerned about conflicting accounts of who would have ultimate control of TikTok’s global operations, according to people familiar with the matter.
They have also been concerned about reports that US parties to the deal could review the source code of TikTok, the basis for a computer program that companies generally consider proprietary, these people said.
In the eyes of Chinese officials, the TikTok deal is broader than a simple business transaction, people familiar with the discussions said. The fate of TikTok touches on China’s “core interests,” such as protecting Chinese-developed intellectual property from falling into foreign hands, they added.
TikTok, a social media app known for its catchy dance and lip-sync videos, rose to prominence this year when the coronavirus confined millions to their homes and they turned to the app for entertainment. Its potential sale has captivated the global business and investment community, drawn in by its geopolitical implications, twists and turns, and colorful personalities involved.
TikTok’s problems in the US began last November when the US Foreign Investment Committee in the US initiated a national security review of the app, and accelerated in August when President Donald Trump signed on. an executive order requiring TikTok to sell its US operations or face an impending ban.
Since then, the US ban has been challenged by a federal judge, who asked Trump to postpone the ban or face questioning in court.
After weeks of tense negotiations, Beijing-based ByteDance chose Oracle Corp. and Walmart Inc. as US partners, saying the two would buy a 20% stake in TikTok Global, a new company spun off from the Chinese parent. to maintain social networks. global app assets. TikTok Global would then seek an initial public offering of shares, the company said.
Still, the deal is far from closed, with ByteDance and its potential US investors arguing over terms and Trump wavering in his support for the offer.
ByteDance has said that it would directly own an 80% stake in the new TikTok entity before the expected IPO, while a senior Oracle executive said that the Americans will be the majority owners and ByteDance will have no ownership in TikTok Global.
Walmart has said that the technology will remain in the possession of TikTok Global and agreed that the new company would be majority owned by US investors.
Oracle could review TikTok’s source code and software to make sure there are no back doors for the Chinese government to gain access to the data, The Wall Street Journal reported. One of the top US concerns about TikTok is whether China has access to the personal data that the app captures from US users.
As the Trump administration’s Sunday deadline for banning TikTok from U.S. app stores nears, ByteDance said Thursday that it had presented a White House-backed plan to officials at trade in Beijing for approval under the recently changed technology export control rules.
In late August, China updated a technology export control list for the second time in 20 years, seen as a move to give Chinese authorities a voice in the deal. This puts the decision to go ahead with the sale in the hands of China.
Under the relevant law, a Chinese exporter would have to submit an application to the local trade authorities before any transactions involving listed technologies take place. Local trade, science and technology officials will respond within 30 business days on whether they can continue with the negotiations.
Chinese authorities have been mostly silent since Trump said Saturday that he had blessed the deal. But since then, China’s state media have published numerous editorials criticizing the agreement as “dirty and unfair,” calling it an act of piracy by the United States and criticizing how such a move would threaten China’s national security.
One person said ByteDance staff were reprimanded by government officials for failing to consider China’s interests when negotiating the deal.
Still, another person said the Chinese side still sees room for negotiation on the deal. For Beijing, Trump’s agreement to delay the ban until after the November presidential election indicated his desire not to alienate young American voters who use TikTok, and that concern would work in China’s favor, the person said.
—Raffaele Huang contributed to this article.
Write to Liza Lin at [email protected] and Lingling Wei at [email protected]
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