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Dealing With Deadlines

Caught between the technological rivalry between the US and China, the fate of TikTok, one of the fastest growing social media apps in the world, is in limbo

By NewsChina Updated Dec.1

It has been several anxious weeks for TikTok users since US President Donald Trump signed an executive order on August 6 to ban what is the fastest-growing social app in the US starting September 20, which was later extended to September 27. The Trump administration has been accusing TikTok, owned by Chinese tech firm ByteDance, of posing a threat to US national security.  

In a separate executive order issued on August 14, Trump gave the company 90 days to find an American buyer, or face a total ban starting November 12, prompting Beijing-based ByteDance to approach American firms such as Microsoft and Oracle, while launching a lawsuit against the Trump administration over the ban. 

Temporary Reprieve 
In the latest episode in the battle over the app’s fate, a federal court granted an injunction that temporarily put the White House’s ban on hold just hours before it was to take effect.  

The reprieve appears to be a temporary win for the company, but the fate of its US operations is far from certain. While the court’s ruling allows for downloads of TikTok from US app stores, it does not cover the looming prospect of an outright ban.  

If the company fails to finalize negotiations with an American buyer, the app’s operations in the US could cease completely when the second executive order takes effect. TikTok didn't file a legal request before October 14 to temporarily block the ban or to try to push the deadline further.  

Amid the legal battle, ByteDance has been seeking a potential deal with US companies. Given the news of a potential sale to US tech giant Oracle, it remains unclear whether ByteDance will double down on its challenge to the White House or resort to reaching a deal before the November 12 deadline.  

Race for a Buyer
Since Trump announced its ban on TikTok, ByteDance has raced to find a US buyer. On September 14, US Treasury Secretary Steven Mnuchin said that the US government received a proposal involving Oracle and Walmart to alleviate the White House’s national security concerns over TikTok. Oracle then confirmed the existence of a tentative agreement with ByteDance, saying that the tech firm would serve as “a trusted technological partner.” 

While Oracle did not offer further details, the offer came as a relief to Chinese analysts, as many believed that the potential settlement would resemble the one that reached for Apple’s operations in China. Since 2018, the iPhone maker has stored data from Chinese mainland users in centers operated by AIPO Cloud Technology, a State-owned enterprise.  

As more details surfaced, it was clear that the Trump administration wanted more control over TikTok. After saying he approved of the deal “in concept” and gave it his “blessing” on September 19, Trump said on September 21 that Oracle and Walmart would either have “total control” over TikTok Global or he would not approve the deal. 

While Oracle and ByteDance confirmed that they have agreed on a deal, each provided contradicting details. According to a ByteDance statement on September 21, it would create a new company called TikTok Global to handle the app’s business outside China.  

The new company will conduct a pre-IPO round with Oracle and Walmart which agreed to buy a total of 20 percent (reportedly 12.5 percent and 7.5 percent respectively), leaving ByteDance with an 80-percent stake in the company.  

By contrast, Oracle said in a statement released on the same day that upon the creation of TikTok Global, ByteDance would “have no ownership” in the new company, and TikTok Global’s shares would be distributed to ByteDance’s stakeholders rather than to the company. “Americans will be the majority,” said the statement.  

According to a CNBC report, ByteDance and Oracle’s statements are not as contradictory as they appear. As 41 percent of ByteDance is owned by American investors, TikTok Global would be 53 percent American-owned if ByteDance had an 80-percent stake. 

Citing “people familiar with the matter,” the report said that US citizens would hold four of the five seats on TikTok’s board, including a national security director. 

Beijing’s Stance
Other than the role of ByteDance in the new company’s future, other issues appear unsettled. According to Trump, the deal will include a US$5 billion education fund paid to the US Treasury. In response, ByteDance said the fund is not part of the deal, but rather a projection of income tax and other fees the new company would pay over the years.  

More importantly, there is uncertainty about the role of the Chinese government in the potential deal. On August 28, China’s Ministry of Commerce released an updated export control list to include technologies such as personalized information push services based on data analysis. The move is widely considered a response to Trump’s ban on TikTok and the reported negotiations between ByteDance and potential US buyers.  

In a widely cited commentary, Professor Shen Yi, a political scientist at the Shanghai-based Fudan University, wrote “The Chinese government officially entered the game surrounding TikTok,” also saying that vying for control of TikTok has become a battleground for the US and China. 

After the deal was announced, State-run newspaper the Global Times published an editorial on September 21 saying that China will say “no” to the US “robbery” of TikTok. Made under coercion, the deal reflects “Washington's bullying style and hooligan logic” and that “China will not accept this kind of bullied arrangement by the US,” the editorial read.  

“It [TikTok] will be targeted by the US and turned into a US-controlled company via trickery and coercion, which eventually serves only US interests,” it read.  

It remains unclear whether and when the deal will be subject to the approval of the Chinese government. According to Trump, the deal has “nothing to do with China.” But many think otherwise.  

ByteDance claimed that the deal does not involve transfers of algorithms and technology to Oracle. But confusingly, the company filed requests for export of certain technologies with Chinese authorities. China’s Ministry of Commerce acknowledged the filing on September 24, saying it would be assessed “in accordance to relevant regulations.”  

Some believe the contradictory claims on the basics of the deal between ByteDance and Oracle reflect the gap between the two governments, rather than the two companies. A separate commentary published in the Global Times on September 26 said the deal “goes way beyond just a mafia-style robbery of a lucrative Chinese business and cutting-edge technologies,” and poses a threat to Chinese national security. “The US could find loopholes in those technologies to launch cyber and other attacks on China and other countries to preserve its hegemony,” said the article, suggesting that the Chinese government will not approve the deal unless ByteDance remains in control.  

Following the recent court ruling, the US Justice Department vowed that it will defend Trump’s order. ByteDance and Oracle have refused to comment on the status of the deal.  

As Trump shifted his focus to his Supreme court nominee, re-election campaign and Covid-19 diagnosis, the fate of TikTok became a lower priority on Washington’s political agenda. With the presidential election only a month away, TikTok’s deal is very likely to slip past the election. 

In the meantime, TikTok’s popularity continues to grow. According to a report released by investment bank Piper Sandler on October 6, TikTok surpassed Instagram as teenagers’ second-favorite social media app with 29 percent of US teens picking it as their favorite social app, trailing only Snapchat’s 34 percent.  

But with so many unanswered questions, the confusing geopolitical soap opera surrounding TikTok may soon get even more dramatic.