Zhang Yiming’s plan to sell the US operations of his short video app TikTok to avoid a shutdown was jeopardized after China asserted its authority over a deal that was already under scrutiny by the Trump administration.
Beijing added uncertainty to already thorny negotiations on the sale of ByteDance Ltd.’s prized asset on Friday, citing the ability to block a sale to foreign suitors Microsoft Corp. or Oracle Corp. with tougher restrictions on artificial intelligence exports. The Commerce Ministry added voice and text recognition and personalized recommendations to a list of products that require approval before being sold abroad.
These new areas cover the same technologies that ByteDance employed to make TikTok a viral teen sensation from the United States to India. The company is now required to seek government approval on any deal, though that doesn’t mean a total ban, according to a person familiar with the matter. TikTok is analyzing the new regulations and believes they will make it difficult to obtain a settlement, said a second person familiar with the matter.
For China, the move helps gain leverage to prevent what state media called “theft” of technology, while underscoring to the United States that it has intellectual property worth protecting. It also increases the likelihood that a deal will be delayed and Trump will go ahead with a TikTok ban before the November election, depriving millions of teens of any updates to the app, though they may still be able to use the current version.
“Artificial intelligence is a fundamental technology and is one of the key sectors that China intends to lead, competing with the United States,” said Rebecca Fannin, founder of Silicon Dragon Ventures. “This pullback from Beijing could be seen as part of the growing tensions between the United States and China and the technological cold war.”
China’s opaque regulations introduce more unknowns to an already delicate process involving multiple corporations, agencies, and federal courts, all converging days before Donald Trump’s executive order banning TikTok takes effect before the November election. It could take up to 30 days for ByteDance to get the green light to export AI, said Zhaokang Jiang, a business lawyer and managing partner at GSC Potomac.
The involvement of Beijing, which has denounced the Trump administration’s bans on Tencent Holdings Ltd.’s TikTok and WeChat, muddies the waters as US corporations and investors compete for a deal before the Trump administration’s deadline. Microsoft and Oracle submitted rival offers to acquire TikTok’s business in the United States, while Centricus Asset Management Ltd. and Triller Inc. made a last-minute pitch on Friday to buy TikTok’s operations in several countries for $ 20 billion, according to a person familiar with the matter. .
“We have been seeing US restrictions on China on a daily basis. We cannot hope that China will not have an answer, ”said Wang Huiyao, China’s cabinet adviser and founder of the Center for China and Globalization.
China’s Foreign Ministry again criticized the US government’s measures on Monday.
“We oppose the United States abusing the concept of national security and state power to suppress specific businesses from other countries,” Chinese Foreign Ministry spokesman Zhao Lijian said at a daily briefing in Beijing. “The US attempt to take on economic harassment and political manipulation against non-US companies, whether it be a politically forced transaction or a government-imposed transaction, is no different from looting.”
Beijing’s new technology restrictions mirror US sanctions against the sale of US software or circuits to a plethora of Chinese companies. In addition to giving him a voice in any imminent deals, the seemingly innocuous changes provide another bargaining chip in the technological cold war between the United States and China.
“Beijing’s responses to Washington over the past five months have been largely designed to look like retaliation, but are in fact carefully calibrated to put Beijing on an equal footing with the United States without escalating tensions, yet,” Kendra Schaefer said. , Head of Digital Research at Trivium Consulting in Beijing. “This measure is no exception: it may give Beijing a more equitable basis for the United States to not be able to make decisions unilaterally, but it does not necessarily indicate that Beijing will take steps to reject the agreement.”
ByteDance has become one of several Chinese companies at the center of the Washington-Beijing tensions. Trump accuses the company’s app of being a threat to national security, echoing the charges against telecoms giant Huawei Technologies Co. The White House has now ordered Zhang’s company to sell the app’s operations in the US. The US and several other countries, with an estimated valuation of $ 20 billion. to $ 50 billion.
It is not clear how the bidding process will play out now. Zhang has said that the company, whose TikTok is also banned in India, is working quickly to solve its geopolitical headaches. But Beijing’s insertion into the process increases the chances that it will simply decide to veto or at least delay a deal, with unknown ramifications.
Those results may appeal to Zhang, the 37-year-old founder who made ByteDance the world’s most valuable startup with a valuation of $ 140 billion, according to CB Insights. He had long resisted giving up control of TikTok because he believes the service is becoming one of the few major online advertising businesses, along with Facebook Inc. and Google.
His instincts may be to fight: he has argued with authorities in Beijing over politically sensitive content and with Chinese publishers over allegations of copyright infringement.
TikTok has asked a federal judge to stop the Trump administration from enacting a ban on the fast-growing social media network, bringing a geopolitical scramble for technology and commerce to a US courtroom.
Even before the latest regulations, Microsoft or any other American owner faced the difficult task of separating TikTok US from the much larger Chinese business of ByteDance.
ByteDance runs TikTok in multiple regions, often using code from Musical.ly, the parent of the application ByteDance acquired in 2017. With ByteDance engineers in China still working on TikTok, it is unclear how Microsoft could divide the code and the underlying technology to ensure is free from Chinese interference, or determines the value of an independent operation that may not have access to ByteDance technical magic.
The revised rule on Friday would cover cross-border transfers of restricted technologies even within the same company, while the impact and consequences of not making the proper applications would be very different if an international company were spun off, said Cui Fan, a trade expert. who is a professor at Beijing University of Economics and International Business.
“We are studying the new regulations that were published on Friday. As with any cross-border transaction, we will follow applicable laws, which in this case include those of the US and China, ”ByteDance General Counsel Erich Andersen said in a statement.
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