[ad_1]
Just a few days ago, the TikTok deal looked like a win for China. Now his state media denounces it as “an American trap” and a “dirty and dishonest stunt.”
The rapid change of mind shows the complications of closing a deal that is much more than finding a suitable valuation for an addictive video app that has captivated teenagers around the world. It also has big ramifications for how the world’s largest economies handle security threats related to new technologies that will drive growth for decades to come.
For China, the political stakes are similar to the marathon trade talks that ended with a phase one deal in January. Any deal that looks like the Trump administration forced China’s hand could hurt President Xi Jinping, who has repeatedly praised the rise of the Communist Party as a great power in contrast to the humiliations suffered under colonial powers centuries ago.
“Basically, Beijing doesn’t want to set a precedent where the United States is allowed to flex unilaterally in this way,” said Kendra Schaefer, director of digital research at consultancy Trivium in Beijing. “Having a role to play in the decision balances things out a bit.”
Over the weekend, Oracle Corp and Walmart Inc agreed to take 20% of a new US-based entity called TikTok Global that would protect the app’s international operations and data, worth an estimated $ 60 billion. dollars ($ 249.27 billion). ByteDance Ltd seemed to get most of what it wanted, including keeping the valuable artificial intelligence algorithms for its short video app.
That seemed to appease both Donald Trump, who declared victory and overturned the TikTok ban, and China’s more nationalistic media outlets. Hu Xijin, the influential editor-in-chief of The Party-run Global times, said the deal “remains unfair but avoids the worst outcome.”
By September 21, signs of trouble emerged. ByteDance claimed that it would retain control of TikTok Global, which appears to contradict previous comments by Trump on how Americans would run the new entity. Oracle issued a statement backing Trump’s view, and the US president warned that it could still torpedo a deal if the US parties did not have a majority stake.
“They won’t have anything to do with it, and if they do, we just won’t come to an agreement,” Trump said, referring to ByteDance, which owns TikTok. “It’s going to be controlled, totally controlled by Oracle, and I guess they will go public and buy the rest, they will buy a lot, and if we find out that they don’t have full control, then we are not going to approve the deal.”
On Wednesday, two of China’s most prominent state-backed media spokespersons denounced the deal.
“What the United States has done to TikTok is almost the same as a gangster forcing an unreasonable and unfair business on a legitimate company,” said the China Diary wrote in an opinion piece Wednesday. Hu del Global times He tweeted that Beijing would likely not approve the current deal as it endangers China’s national security.
The saga has sparked “total disbelief” among Chinese leaders, said Gao Zhikai, a former diplomat and translator for the late leader Deng Xiaoping, who is now a senior lecturer at Soochow University. “China wants to emphasize that the legitimate rights of Chinese companies cannot be violated without consequences.”
It is unheard of for the main parts of a mega-deal to diverge so dramatically in their basic contours. While Trump has yet to give his final approval and thus the deal remains in flux, Beijing will intervene if it believes ByteDance is at risk of giving too much, Trivium said in a Tuesday note.
It is not clear how exactly that would happen. The Ministry of Commerce or the Ministry of Science and Technology could intervene if they have concerns about technology transfer. Several others could get involved for competition reasons. And reservations around national security could involve any body from the Council of State or the cabinet down.
“The decision could be out of the hands of the Ministry of Commerce and decided by top leaders on both sides,” said Xu Ke, a law professor at the University of International Business and Economics. “The case for TikTok must be seen in the context of the trade war, technology decoupling and broader competition in technology between China and the United States.”
While Treasury Secretary Steven Mnuchin is confident that Trump will sign the transaction, US national security officials are expressing concern that US TikTok user data remains with a Chinese company, Bloomberg reported. The TikTok algorithm could also be used to influence public opinion, particularly ahead of the November 3 election.
China is preparing to strike back. The Commerce Ministry said Saturday that it could restrict trade, investment and visas for companies on a “list of untrustworthy entities” without naming anyone specifically.
A deal is still possible. ByteDance has made clear that its AI technology remains in Chinese hands, while Oracle will store TikTok data on more than 100 million Americans on American servers.
Now it seems to be more of a question of political viability, for both Trump and Xi.
China’s leaders “don’t want to play Trump for anything,” said Ding Chenling, a tech entrepreneur who said he has known ByteDance founder Zhang Yiming for more than five years. “That will also infuriate the nationalists in China.” – Bloomberg
[ad_2]
