SOURCE / COMPANIES
TikTok, WeChat face new risks after 'win'
Chinese govt, firms, users set to fight US' ban after new threats
Published: Sep 22, 2020 12:31 AM

WeChat TikTok Photo:VCG


Popular Chinese mobile apps TikTok and WeChat encountered fresh new challenges and risks on Monday just a day after their plight in the US made what some called a positive turn, as US President Donald Trump threatened to block a restructuring deal for TikTok and the US Commerce Department said it would counter a court order that blocked a government ban on WeChat.

However, the latest threats from Trump and his administration will not go unchallenged not just in China but also in the US, as ByteDance, the Chinese owner of TikTok, has made it clear that it would not give up full ownership of the app and its algorism, and a US WeChat users group said it was ready to fight a US government appeal and the Chinese government is set to step in to protect Chinese technologies and interests under a revised export regulation.

Still, the latest positive developments brought the two Chinese companies a better, if far from perfect, position to protect themselves and offered the broader Chinese tech sector at the forefront of the US' tech war on China a glimmer of hope that there are ways to beat back the US crackdowns with the help of the Chinese government and to avoid becoming sitting ducks, experts said.

Fresh battle   

In an interview with Fox News, Trump said that if Oracle and Walmart "find they don't have total control, then we're not going to approve the deal." He even suggested that ByteDance would have to completely lose the app, or "we just won't make the deal." 

Trump's remarks on Monday, which came two days after he said on Saturday afternoon that he had "approved the deal in concept," once again threw the emerging restructuring plan and along with it TikTok's fate in the US into doubt.

However, Trump's new threats will unlikely go unchecked in China, where ByteDance has insisted that it would retain a controlling stake in the new subsidy in partnership with Oracle and Walmart, and Chinese officials made it clear that no deal will be completed without their approval.

"This is just another trick for negotiations, and the Chinese side will not be thrown off of its feet," Liu Dingding, an independent internet analyst in Beijing, told the Global Times on Monday, adding that the Chinese side was ready for the worst case scenario, where it will be a lose-lose for both sides.

In a lengthy statement on Monday, ByteDance pushed back against four rumors regarding the plan. The firm said that TikTok Global, though with its headquarters in the US, is a wholly-owned subsidiary, in which it will retain an 80 percent stake after a pre-IPO financing round. 

ByteDance also made it clear that the deal would not involve the transfer of any algorithms and technology, though Oracle would have access to TikTok's source code for US users. It said that reports of TikTok Global paying the US Treasury $5billion is actually an estimate for corporate taxes in the years to come. It said it only heard for the first time in media reports that TikTok Global would set up a $5 billion education fund in the US. 

While Chinese officials have not issued a decision on the proposed plan, they will unlikely allow any deal that would require the Chinese firm to lose its ownership of TikTok and give up its algorithms, the artificial intelligence powered content recommendation system behind the app's success, to US companies, experts noted.

After Trump issued an executive order in attempt to force the sale of TikTok to US businesses, China at end of last month moved to revise its regulations on banned and restricted technologies to include algorithms, a move that has been widely viewed as a shield against the US robbery of TikTok and its technologies.  

"Whatever the eventual deal might look like, if there is one, it needs to gain the approval of China's Commerce Ministry," Xiang Ligang, director-general of the Beijing-based Information Consumption Alliance, told the Global Times on Monday, adding that the battle will continue in the coming weeks and China is unlikely to succumb to Trump's will.

In the case of WeChat, the US Commerce Department said Monday that it will challenge the court ruling, Reuters reported. "Prohibiting the identified transactions is necessary to protect the national security of the United States, and the department expects to soon seek relief from this order," the department said.

The statement came after US Magistrate Judge Laurel Beeler issued an order Sunday for a preliminary injunction blocking the US government's planned ban on new downloads of WeChat in the US, saying that there was no "viable substitute platforms or apps" for the Chinese-American community if WeChat was banned.

A spokesperson for the US WeChat Users Alliance, which filed a motion to block the US government Ban, told the Global Times on Monday that the group was preparing to fight the US appeal and has raised its target for donor funding for lawyers' fees to $270,000 in September, factoring in the "prejudgment that the consequent legal battle will be even more fierce."

Also behind the group's efforts are a massive user base in the US, who are backing the battle against the US government. "We still have no idea whether [Trump] will ban WeChat. Everyone is jittery… we just feel so powerless. Hope the judge will reject the WeChat Ban," a WeChat user living in Washington DC, told the Global Times.  

Better position

In China, while the indignation toward the US government's clampdown on the two companies based on vague national security concerns remain fierce, the initial success for both firms to avert US bans, though temporarily, offered rare positivity and even some optimism among the Chinese tech sector facing an ever-hostile US government.

"This is definitely a positive sign at the moment, because [the companies] basically had no option but to expect to be chopped into pieces before, no matter how unfair and unreasonable it was," Fang Xingdong, director of the Consortium of Internet and Society at the Communication University of Zhejiang and a former internet entrepreneur, told the Global Times on Monday.

The US government has imposed various sanctions on more than 300 Chinese companies, including a recent ban on all foreign supplies of chips to Chinese telecom giant Huawei. Though some companies, including Huawei, have taken legal and other measures against the US crackdown, there have been no apparent successes like WeChat and TikTok, experts noted.

For TikTok and WeChat, "there are still troubles to overcome in the short term, which could definitely lead to some heavy losses for the company," Fang said.

However, Fang said that the companies are in a relatively better position because of their massive user and business partner bases in the US, their legal and other strategies, and the strong role of the Chinese government in protecting firms - all crucial lessons for Chinese companies to cope with an extremely political external environment in their globalization process.

"For companies as well as the government, this is a new lesson, which we must learn from, even as we have to pay tuition," he said.


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