US Decouples TikTok As Beijing Invites In Foreign Investors

THERE IS MORE than a touch of the surreal about what is happening around TikTok. ByteDance’s short-video sharing app is popular with US teenagers but not with the Trump administration, which has found it guilty as charged of being Chinese owned and thus a national security threat.

Zhang Yiming, ByteDance’s founder and chief executive, has told staff that the company faces a real possibility of a ban in the United States or a forced sale of its US operation. In the latter circumstance, the likely purchaser would be the US tech group, Microsoft.

The US software giant is negotiating to buy not only TikTok’s US business but also its operations in Canada, Australia and New Zealand. They are three of the ‘Five Eyes’ security alliance of Western powers, which would be likely to follow suit if Washington banned TikTok on security grounds.

Microsoft is proceeding with the deal following a Sunday conversation between its chief executive, Satya Nadella, and US President Donald Trump, who has given Nadella 45 day’s to complete the transaction, or he will carry through his earlier threat to ban it. Trump has also said that the US government should get a ‘substantial cut’ of the purchase price as he has made the deal possible.

Whether Trump is serious about taking a federal finder’s fee or whether that is just Trump being self-aggrandisingly Trump, this Bystander has no idea. However, it says something about the state of governance in the United States, that either is credible.

The former, however, would redefine state appropriation and take mercantilist government into new and uncharted waters, even for the US-China relationship. It could not be called nationalisation, as it would not be taking private assets into public hands but the forced or induced transfer of assets from one set of private hands to another, with the government coercing the parties and (possibly) taking a fee for doing so.

Less fanciful, is the idea that Microsoft’s acquisition of TikTok would be in line with both the administration’s twin goals of curtailing Chinese technology and advancing US corporate interests and its liking for private sector solutions to public policy issues. Those goals are not always reconcilable.

The other dimension to this is nationalist economic policy, already well observed during the Trump administration. The president’s special advisor on trade, Peter Navarro, has suggested that Microsoft divest itself of all its China businesses. That is a highly unlikely outcome. Microsoft has been in China for almost three decades and is the most embedded of all the US tech companies. However, Navarro’s suggestion serves as a reminder of the role ‘decoupling’ plays in US policy goals. That said, Microsoft buying TikTok at a distressed price in the face of a threatened government ban would not fit many prior definitions of decoupling.

State media have called it ‘smash and grab’.

For Beijing, this is thus an apt moment to give foreign investors increased access to China’s economy. The National Development and Reform Commission and the Ministry of Commerce, the country’s top economic planning agencies, have jointly published the new draft catalogue of manufacturing and services sectors eligible for preferential policies to encourage foreign investor participation. One hundred and twenty five industry sub-sectors are added to last year’s list and access to 76 previously listed is expanded.

The is focus on the automobile, computer, communications and other electronics industries, all sectors with competitive US multinationals that Beijing would probably prefer to have inside its tent than outside.

2 Comments

Filed under China-U.S., Media, Technology

2 responses to “US Decouples TikTok As Beijing Invites In Foreign Investors

  1. Pingback: Washington’s China Hawks Run Free | China Bystander

  2. Pingback: US Announces New Investment Ban On Chinese Companies With PLA Ties | China Bystander

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