Update on September 4, 12:23 IST: China has confirmed it will have to greenlight Bytedance’s acquisition by an American firm. A Chinese foreign ministry spokesperson, Gao Feng, on Thursday stressed that the regulatory changes aren’t targeted at a specific company. But companies looking at American investments should consult relevant government agencies should any technology they deploy fall under the export control list. “If the technologies specified in the Catalogue are involved in trade, investment or foreign technological cooperation of relevant companies, we suggest these companies consult with provincial commerce authority in a timely manner and act in accordance with regulations,” Feng said.
Original story on August 31, 11:59 IST:
The Chinese government has added artificial intelligence technology to its export control list, possibly jeopardizing the impending sale of Bytedance’s TikTok US operations. The restriction effectively implies that Bytedance will have to seek China’s approval to sell TikTok’s US operations. This development was first reported by the Nikkei Asian Review. On Friday, China’s Commerce Ministry and its Science and Technology Ministry added “technology based on data analysis for personalised information recommendation services” to a list of services of export-control products. Using a bureaucratic tool, China has essentially found a way to have a say in TikTok’s imminent sale to an American company, and will likely be another flashpoint in US-China relations.
TikTok’s algorithm provides a highly personalised feed to its users and it is a key factor credited for the platform’s popularity. This algorithm will likely fall under the restricted category. TikTok also shares technical resources including its user interface and some software code with its Chinese version Douyin which may add to the complications, according to Forbes.
Aside from the list, China’s official news agency Xinhua published an article by a professor who said that the new restriction would mean that Bytedance might need a license to sell its technology to an American company, reported the New York Times. Any sale of TikTok would most likely require the transfer overseas of code and technical services, the article said.
Multiple American suitors for TikTok
Oracle is now competing with a joint effort by Walmart and Microsoft to acquire TikTok’s US operations. Meanwhile, Centricus Asset Management Ltd. and TikTok rival Triller have made a pitch to buy TikTok’s operations in India, the US, Australia, and New Zealand.
The race to buy TikTok’s American operations began once US President Donald Trump signed an executive order directing ByteDance to divest from its American assets and its rights to any user data that TikTok gathered in the country, within 90 days. It also directed ByteDance to destroy any TikTok data of US users, and report to the Committee on Foreign Investment in the United States (CFIUS) once all the data is destroyed. The sale of TikTok to a third party will also have to be vetted by CFIUS for all practical purposes.
In an earlier directive on August 6, Trump had prohibited all US transactions with TikTok within 45 days. However, in response to this August 6 directive, TikTok sued the US government, calling the app ban “unconstitutional” and “political”. TikTok said that it had taken “extraordinary measures” to protect the privacy and security of TikTok’s US user data including storing such data outside of China, in the US and Singapore.
Meanwhile, TikTik’s CEO in the US, Kevin Mayer quit just months after being appointed, following Trump’s orders. Mayer did not anticipate that TikTok would become embroiled to this extent in US-China relations.