Tag Archives: TikTok

ByteDance IPO Reportedly Moves Ahead

BYTEDANCE, OWNER OF short video sharing app TikTok, looks set to be rewarded for toeing the Party line amidst the crackdown on tech.

The Financial Times reports that the company is likely to be allowed to go ahead with an initial public offering (IPO) of its shares in Hong Kong later this year or early next.

ByteDance had planned to go public in New York earlier this year but put those plans on hold when told by Chinese regulators to address data security concerns.

It has since been going through the review process and has submitted filings to authorities, the Financial Times reports. ByteDance is hoping that it will get clearance to proceed next month.

It has also denied that the Financial Times report, but with the sort of non-denial denial that suggests that it would not be politically expedient to do anything else.

Last month, Beijing indicated it would require a cybersecurity review of nearly all companies looking to list their share abroad.

Overseas listings have been frozen in effect to safeguard data security in the wake of ride-hailing app Didi Global’s controversial $4.4 billion IPO in New York that the company pushed forward in the face of official objections.

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US Announces New Investment Ban On Chinese Companies With PLA Ties

TODAY WAS DEADLINE day for ByteDance’s divestiture of the short-video-sharing app TikTok, or the United States would ban the app. It is not clear where things stand (update: the deadline has been extended) but US President Donald Trump appears to have moved on to a new executive order.

Today he authorised a prohibition on US investments in Chinese firms held to be owned or controlled by the military. Putting the brakes on the modernisation of the People’s Liberation Army is a particular policy objective of his administration.

The executive order bans US investment firms and pension funds from buying and selling the shares of 20 Chinese companies designated in June by the Pentagon as having military ties. Eleven more companies were added to the list in August. They are also subject to the investment ban, which takes effect on January 11.

The list includes well known companies such as China Mobile and China Telecom, both of which have US-listed subsidiaries.

US shareholders must sell existing holdings by November next year. If more companies are added to the proscribed list, US investors will have 60 days to divest the shares.

This latest measure is based on the International Emergency Economic Powers Act, which gives the US president wide scope to take actions to protect national security, and is becoming an increasingly favoured tool of the administration to counter China.

It follows confirmation of the arrival of US marines in Taiwan for training exercises. While the word is that this is far from the first time that US forces have trained their Taiwanese counterparts, it is the first time that it has been publicly acknowledged — unlike the big-ticket arms sales which tend to get the full hullabaloo.

Another visit by a senior US government official is also reportedly on the cards.

Taken together, and in the wake of Secretary of State Mike Pompeo’s pumping up of the Quad, this is starting to look like a president leaving a plateful for his successor or piling up his own plate in anticipation of a second term.

Either way, it is unlikely to go down well in Beijing.

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Beijing Wants A Cadre Of ‘Reliable And Useful’ Entrepreneurs

WECHAT AND TIKTOK have both secured stays of execution of their US bans: ByteDance’s TikTok by dint of an alliance with Oracle and Walmart that US President Donald Trump has ‘blessed in concept’, whatever that means (probably that it is OK because his friend and Oracle boss Larry Ellison has set it up, even if it does not meet the president’s order that TikTok’s US business be divested to US owners); Tencent’s WeChat thanks to a federal judge in San Francisco issuing a preliminary injunction blocking the Trump’s executive order to shut the app down in the United States.

The tick-tock on TikTok will continue as the deal is yet to be finalised. However, what caught this Bystander’s eye in the WeChat ruling was Magistrate Judge Laurel Beeler’s comments in her written remarks that while the general evidence about the threat to national security related to China regarding technology and mobile technology — the heart of the administration’s argument for the ban — is considerable, the specific evidence about WeChat is modest.

Why this caught this Bystander’s eye was last week’s instructions from President Xi Jinping to the United Work Front Department about the role — and duty — of the private sector and a parallel opinion issued by the Party ahead of the United Front’s work conference on the private sector. The gist of both was the need for tighter Party control over private enterprises and entrepreneurs to focus them on national goals and to create a cadre of within the private sector that is ‘reliable and useful at critical moments’.

This will confirm all the suspicions outside the country that the line between the private and public sectors is becoming ever more blurred and that private ownership of firms does not mean independence from the interests of the state or Party. For Chinese firms operating globally, existing distrust will intensify. The new National Intelligence Law already makes it nigh impossible for them (or any other Chinese firm) to rebuff authorities’ requests that they support national intelligence work.

The new guidance to the private sector will, if anything, widen the scope of how it will be expected to put the national interest ahead of its own. In July, Xi told a symposium for entrepreneurs:

First, I hope everyone will enhance their patriotism. Enterprise marketing knows no borders, and entrepreneurs have a motherland. Excellent entrepreneurs must have a lofty sense of mission and a strong sense of responsibility for the country and the nation, closely integrate the development of the enterprise with the prosperity of the country, the prosperity of the nation, and the happiness of the people, and take the initiative to bear and share the worries for the country.

It remains to be seen how this will play out in practice. In particular, how far will supporting national goals go beyond playing a part in economic recovery from the Covid-19 pandemic and meeting national security obligations? Will it mean playing a directed role in the development of indigenous next-generation technologies and industries that will be needed in a more decoupled world?

Entrepreneurs and firms that understand and adhere to the Party line will likely see significant benefits for their businesses domestically. Foreign firms operating in China will have to find an accommodation with that, even if they are granted some laxity in demonstrating the patriotism that will be expected of indigenous firms. That said, the flip side of a level playing field regardless of a company’s origin is that all firms in China are treated equally.

Next year’s introduction of the 14th Five-Year Plan will provide some clarity. But meeting the plan’s goal of delivering ‘a well-off society‘ will require the innovation of the private sector to be harnessed but not shackled, never an easy balance for industrial policymakers to strike.

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China Mirrors US List Of Unreliable Entities As US Bans TikTok and WeChat

Screenshot of China Ministry of Commerce announcement of the provisions of the Unreliable Entity List, captured September 19, 2020

IN THE MIDDLE of last year, Beijing announced that it was creating an ‘unreliable entity list’. This mirrored the US administration’s use of its cold-war-era entity list of companies, organisations and individuals Washington held to be involved in ‘activities contrary to the national security or foreign policy interests of the United States’.

Beijing today published the regulations of how its version will work — although not the identities of those companies or other entities that are on it. The list will catalogue any entity that poses a threat or potential threat to China’s sovereignty, national security, development and business interests; and those that discriminate against or harm Chinese businesses, organisations or individuals. Those on the list face sanctions from bans on investment to restrictions on work and residence permits and fines. Those come into effect immediately, although listees may be granted a grace period to set right their alleged transgressions.

The new rules were published the day after the US administration banned downloads and transactions related to two Chinese apps, WeChat and TikTok. The restrictions on downloads of the two apps from the Apple and Google app stores take effect from tomorrow (September 20) as does a prohibition on third-party companies providing services within the United States to WeChat such as internet hosting, content delivery networks or peering services.

The third-party services restriction on TikTok is due to take effect on November 12. The stay is to give time for the administration to review a proposed deal whereby the US enterprise-tech giant, Oracle, will take a minority stake in the US and some other international assets of TikTok to satisfy US national security concerns about the video-sharing app’s use of the data it holds on US citizens.

There was a rush to download the apps from the Apple and Google app stores before the bans took effect. It is unclear what penalties US users of the apps will face if they contravene the bans, although the US Treasury is indicating that neither criminal nor civil prosecutions are likely.

The prohibition on using WeChat and its parent Tencent for messaging and for financial transfers and payments aims further the Trump administration’s desire to decouple the two economies. The app is widely used by US businesses and Chinese expats to conduct business with contacts colleagues and customers in China. It has a reported 19 million active daily users in the United States. The Reuters news agency reports that Tencent has quietly developed an enterprise version of WeChat, rebranded as WeCom to avoid the ban, but which it is keeping under-ther-radar in the United States.

As an aside, Beijing recently granted TikTok’s parent, ByteDance a rare new licence to conduct online payments, enabling its Chinese service to move into e-commerce in competition with Alibaba and Tencent, a revenue stream that is out of the question for its US operation, however the ownership of that ends up.

Tencent has said that it will pursue further discussions with the US government while TikTok took the more assertive line that it will continue to challenge what it calls an unjust executive order. The Ministry of Commerce condemned the bans on both apps, promising ‘necessary measures’ to protect the legal interests of Chinese firms, without saying what those might be. Banning US apps in retaliation is not an option as they are already mostly excluded from China.

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Washington’s China Hawks Run Free

THE IMPOSITION OF sanctions by the United States on Carrie Lam, Hong Kong’s chief executive, and ten other current and former officials in the city, is likely more symbolic than substantive. It is rare if not unprecedented, however, for the United States to sanction a head of government. To this Bystander, still spinning from the seemingly daily ratcheting up of US-China tensions by Washington, it feels that they mark the crossing of a threshold, with the China hawks in the US administration having been given free rein and no longer holding back.

The sanctions, imposed under the executive order US President Donald Trump signed in July to punish Beijing for imposing a national security law on Hong Kong, will mean that the eleven will have any property in the US seized and their financial assets frozen. Lam, for one, says she has no assets in the US; this Bystander would hazard that the rest do not either at this point, if they ever did.

The others sanctioned include Hong Kong’s police commissioner, Chris Tang, and his predecessor, Stephen Lo, Justice Secretary Teresa Cheng, Security Secretary John Lee, Xia Baolong, head of the Chinese State Council’s Hong Kong and Macau affairs office and Luo Huining, director of the Hong Kong liaison office.

The sanctions announcement followed hard on the US president ordering US firms to stop doing business with WeChat, the messaging app owned by Tencent, and with the ByteDance-owned video-sharing app, TikTok. The twin executive orders are stayed until September 20, five days after the deadline that the White House has given to Microsoft to conclude an agreement to acquire TikTok’s operations in the United States, Australia and New Zealand.

Decoupling TikTok is in the vanguard of the United States’ ‘Clean Network’ initiative to drive Chinese owned apps and components out of US businesses and those of US allies. It was conceived to thwart Chinese telecoms companies Huawei Technology and ZTE in 5G markets. Announcing the initiative’s expansion earlier this week, US Secretary of State Mike Pompeo, one of the administration’s most hostile China hard-liners, said:

The Clean Network program is the Trump Administration’s comprehensive approach to guarding our citizens’ privacy and our companies’ most sensitive information from aggressive intrusions by malign actors, such as the Chinese Communist Party.

On another front, the Trump administration also announced recommendations that would lead to the long-threatened delisting of Chinese companies from US stock exchanges unless Beijing allows US regulators adequate access to their audited accounts.

Meanwhile, the imminent arrival in Taipei of US health secretary Alex Azar, the highest-level US cabinet official to visit since Washington cut ties with Taipei more than 40 years ago, may prove the most incendiary of Washington’s recent provocations.

That may finally test Beijing’s patience. So far, its public response has been firm but measured, as it has been to each successive provocation from Washington. Wolf diplomacy has been held back. Yang Jiechi, the Politburo member who is the Party’s leading foreign policy strategist, gave an olive-branch speech on US-China relations on Friday, following on speeches and interviews given by Foreign Minister Wang Yi in the same vein. Large-scale purchases of US agricultural produce have also been made to keep the US-China Phase One Trade Agreement alive, with the first round of high-level progress-monitoring talks still possible.

One interpretation of the intensifying of the US administration’s actions is that the president believes continuing to pile pressure on China will be a winning tactic in the run-up to the November election in which he is trailing Democratic candidate Joe Biden in the polls. Another is that the China hawks in the White House, fearful that Trump will not be re-elected in November, are putting in place a web of containment measures that will carry over into the new administration, embedding a de facto ‘cold war’.

Strong anti-China policies would resonate with voters in the United States, where unfavourable views of China have climbed rapidly among both parties over the past year, according to the latest survey by the Pew Research Center published at the end of last month. Eighty-three per cent of Republicans and 68% of Democrats said they had an unfavourable view of China, record highs for both groups. However, only one-third of Democrats say that it is more important to get tougher with China than to build a stronger relationship with it, against two-thirds of Republicans. At 38%, Republicans are also twice as likely as Democrats to describe China as ‘an enemy’.

Beijing’s strategy of taking it on the chin until November in the hope of a change of administration in the US makes sense in that light, as do US intelligence reports that Chinese disinformation campaigns are being deployed in the Biden cause. If it could ever be done, it would make for a fascinating case study to see how they negated Russian disinformation the intelligence reports say is being used to promote a Trump re-election.

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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.

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Beijing Measures Its Response To US Xinjiang Sanctions

BEIJING’S RESPONSE TO the Trump administration’s sanctions on four Chinese officials held to be responsible for human rights abuses against Uighurs in Xinjiang is about as proportionately reciprocal as it gets.

China says it will bar entry to two Senators, Marco Rubio and Ted Cruz, one Congressman, Chris Smith, and the US State Department’s religious freedom ambassador, Sam Brownback. The grounds are the quartet’s criticism of Beijing’s treatment of people of faith.

Rubio co-chairs the Congressional-Executive Commission on China, a US government agency that monitors human rights and rule of law issues in China, which is also sanctioned.

Foreign Ministry Spokesperson Hua Chunying was similarly restrained in responding to a question from the Global Times at her daily briefing today:

It must be stressed that Xinjiang affairs are purely China’s internal affairs. The US has no right and no cause to interfere in them. The Chinese government is absolutely determined in its resolve to safeguard its sovereignty, security and development interests, to combat violent terrorist, separatist and religious extremist forces, and to oppose any external interference in Xinjiang affairs and China’s internal affairs.

Her restraint slipped moments later, however, in response to a different question about a tweet by the US State Department alleging the use of Uighur slave labour in the making of some products:

I also have some Uighur friends who I know are very happy in Xinjiang, breathing freely and enjoying their life, living in a completely different way than African Americans like George Floyd. We sincerely hope that those American politicians will really care about the serious racial issues in their own country and make efforts to protect the human rights of their ethnic minorities.

Hua also left open the door for further sanctions “as the situation develops”. That could be around the TikTok video-sharing app that Trump’s trade advisor, Peter Navarro, has hinted may be banned in the United States, where it is hugely popular, because of its Chinese ownership.

Separately, the US State Department has expanded its travel advisory for China to warn US nationals that they are at heightened risk of arbitrary arrest and of detention and exit bans. An e-mailed version sent on July 11 to US nationals in China said, “Security personnel may detain and/or deport US citizens for sending private electronic messages critical of the PRC government.” Both the new internet law and Hong Kong’s national security law can be applied extra-territorially and to non-Chinese citizens.

None of which suggests much interest in Washington in repairing tattered ties, even if there is any substance to the suggestions that Beijing would like to prevent relations sinking even lower than they have.

Update: China has imposed sanctions on the US defence manufacturer Lockheed Martin in response to Washington’s approval for Taiwan to buy parts to refurbish its Lockheed Martin missiles.

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