Trump in stark turnabout on TikTok deal
TikTok deal offers insights for other Chinese firms: experts
Published: Sep 20, 2020 08:03 PM

TikTok Photo: VCG

In a defiant move against US President Donald Trump's executive order, bans on two Chinese apps -TikTok and WeChat - which were supposed to take effect on Sunday, have been either suspended or delayed. 

Industry observers said the latest development has been an inspiring sign for Chinese firms against the backdrop of a simmering China-US tech war, offering insights for other embattled Chinese firms on how they could "fight" against the US government to achieve a best-case scenario.

In a stark turnabout from a tough tone on TikTok ahead of a forced sale of its US operations, US President Donald Trump on Saturday approved a partnership deal between TikTok's parent company ByteDance and Oracle "in concept." The deal reportedly does not involve the sales of algorithms and technology to US firms while allowing ByteDance to be a majority owner of its US business.

The new development points to a deal that could be less costly for the company after a seesaw battle amid Washington's maximum pressure tactics and Beijing's well-leveraged defense, which gives the Beijing-headquartered tech firm more bargaining chips on the negotiation table, Chinese analysts said.

The big reversal exposed the Trump administration's nature as a "paper tiger" that is driven by commercial interests and would compromise on key issues if well traded, observers said. Such logic would offer inspiring insights for other embattled Chinese firms.

ByteDance, Oracle and Walmart have reached an agreement in principle, ByteDance told the Global Times on Sunday. The three parties will reach a cooperative agreement, subjecting to US and Chinese government approvals as required by applicable laws, as soon as possible. 

The agreement aims to strengthen TikTok's business in the US and meet the regulatory requirements of the US administration, ensuring that 100 million Americans can continue to use the highly popular video and content app, the company said. 

US president Donald Trump has reportedly approved the deal between TikTok and the US companies "in concept," temporarily averting a ban on TikTok in US app stores, Bloomberg reported. The US Commerce Department said on Saturday it would delay restrictions that would remove TikTok from US app stores by one week. The ban was originally supposed to take effect on Sunday.

Trump said that TikTok would be incorporated in Texas as a new company. The new company would be called TikTok Global, with ByteDance retaining a majority stake in TikTok and control of its key assets, algorithms, the report said. 

According to another CNN report, Walmart and Oracle will also take part in a TikTok Global pre-IPO financing round, taking up to a 20 percent cumulative stake in the company. 

No specific details on the deal have been revealed so far. 

Oracle said in a statement on Monday that it would become a "trusted technology provider" of ByteDance. Some analysts compare the partnership to "California on the cloud," under which Oracle will serve as a partner on ensuring TikTok's data security and compliance, while TikTok - which has an office in California - will remain in control of its technology.  

A U-turn 

In the press briefing on Saturday, Trump said he had given the deal his blessing. "If they get it done, that's great. If they don't, that's okay, too," he said.

The blessing comes after the US Commerce Department said on Friday that as of Sunday, any moves to distribute or maintain TikTok on app stores such as the Apple Store and Google Play would be prohibited, and a more extensive ban against the app would be applied from November 12 onwards.

Trump himself also hinted on Wednesday that he was "not prepared to sign off [on] anything," casting a shadow on the possibility of disapproving the deal back then.

Chinese observers said that a U-turn in Washington's attitude is a common US political play of "maximum pressure" to up its ante on the negotiation table, so as to force the Chinese tech firm to relinquish their "bottom line."

"The deal is one step closer to being finalized. So the seven-day extension on the TikTok ban is also a strategy to leave room so as to lend a favor to the US side," Ma Jihua, a senior analyst in the internet industry who has been closely following the TikTok event, told the Global Times on Sunday. 

Trump on Saturday claimed that the new company will "have nothing to do with China," and is owned by American investors. But in fact, the agreement, if inked, is a lot different from the Trump administration's previous "pirate-style plan" on many fronts, including forcing TikTok to spin off its US business and selling it to US companies as a whole.

Analysts believed that the involvement of the Chinese government has reshaped how the deal is going. 

In early September, China's Ministry of Commerce revised its restrictions on technology exports, including AI algorithms. Beijing on Saturday issued provisions for its highly anticipated first unreliable entity list, which aims to penalize foreign entities and individuals that harm Chinese interests.

"At a critical moment, Beijing took action to protect the interests of Chinese tech companies… The Chinese government does not go on an all-out confrontation, but is defending in a smart way which gives ByteDance bargaining chips to cushion against US pressure," Ma explained. 

If the ban on Tiktok takes effect next week, industry observers believed that the newly released rules for the unreliable entity list will lay legal ground based on which Beijing could target US companies that harm the legal interests of Chinese firms. 

"This is one of the first times that Beijing has successfully planned a counterattack, there will be more in the future," Ma predicted. 

A fighting spirit

On Friday, shortly after the US Commerce Department's Tiktok ban, ByteDance responded with a tough-worded statement, saying that the firm is "disappointed with" the decision and will continue pushing forward with its suit challenging the administration's efforts to ban TikTok in the US.

ByteDance's hard stance sends a signal to the US that Chinese tech companies won't yield to the maximum pressure approach, according to analysts. 

On the US side, Trump's administration has been interests-oriented at the course, as US officials for the most time are acting like "paper tigers," bluffing rather than really taking a bite, analysts stressed. 

"It is important for Chinese enterprises, which are caught in the crossfire of China-US tech war, to embrace a fighting spirit and never retreat on their bottom lines," Liu Dingding, an independent internet analyst in Beijing, told the Global Times on Sunday. He explained that as Washington doesn't want to see a zero-sum game under which no one gains, they're willing to trade off on critical issues if Chinese companies stick to their stance. 

In addition to TikTok, a handful of Chinese tech firms including Tencent, the owner of Wechat as well as telecom equipment maker Huawei are either facing potential limitations or had already been cut off from the components supply by Washington.

"If you make up your mind to break the caldrons and sink the boats after crossing, you will probably have the best outcome," Ma said.