Oops! U.S. plan backfires as China could determine who gets to buy TikTok in the U.S.

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At the beginning of this month, U.S. President Donald Trump signed an executive order demanding that TikTok parent ByteDance divest itself of the popular short-form video app by the middle of September or get banned in the states. Users of the app can produce videos lasting 15 seconds to as long as 60 seconds. Content includes lipsyncing, dancing, gags, and more. Already wildly popular before the COVID-19 pandemic, teens and others used the app to kill time during those long, long days stuck at home. With 100 million users in the states and 800 million globally, TikTok has been installed over 2 billion times from both the App Store and the Google Play Store. The latest count shows 50 million daily active users in the states.

Purchase of U.S., Canadian, Australian and New Zealand TikTok operations could result in $20-$30 billion transaction

Possible buyers of TikTok’s U.S., New Zealand, Canadian and Australian operations include Microsoft, Walmart, Twitter, and Oracle. A deal to purchase the aforementioned TikTok operations could be valued in the neighborhood of $20 billion to $30 billion. Late Friday, Beijing threw a new wrinkle into the talks by revising a list of technology that is banned or restricted from being exported out of China. According to Cui Fan, a professor of international trade at the University of International Business and Economics in Beijing, the changes would apply to TikTok. “If ByteDance plans to export related technologies, it should go through the licensing procedures,” Cui said in an interview.

China’s Ministry of Commerce added 23 items to the restricted list and  ByteDance general counsel Erich Andersen said “We are studying the new regulations that were released Friday. As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the United States and China. TikTok’s secret sauce is its recommendation engine which uses algorithms to determine the next video users should watch based on the analysis of users’ behaviors. This technology might need to be transferred to the company that ends up buying WhatsApp.

Professor Cui says, “Therefore, it is recommended that ByteDance seriously studies the adjusted catalogue and carefully considers whether it is necessary to suspend” negotiations on a sale of TikTok.

As with any Chinese tech firm doing business in the U.S., TikTok is considered a national security threat because of its ties with the Communist Chinese government. China’s foreign ministry opposes the executive orders that Trump has placed on TikTok. Beijing says that it will defend the legitimate rights and activities of Chinese businesses.

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