Chinese officials decried the lack of “fairness” in the United States last week following the swift passage of a House bill calling for Chinese company ByteDance to divest popular social media app TikTok.
A spokesperson for China’s foreign ministry accused the United States of using national security as a cover to “deliberately suppress other countries’ superior companies” and strongly hinted that the Chinese government would block any forced sale of the most popular social media app.
But beyond preventing a split, China’s potential retaliatory options against the United States remain limited, experts say, given the country’s current economic situation and its own censorship policy.
“As they take some sort of retaliatory action, it actually further strengthens the decoupling agenda of some in Washington,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. “[That] “It encourages companies to withdraw from China because they don’t feel safe there.”
China is evaluating its options with TikTok
The latest congressional action marks another turning point in a years-long effort to limit the scale and influence of a social media app that has reached more than 170 million users in the United States.
Since its launch in 2017 as the international version of parent company ByteDance’s popular Chinese app Douyin, TikTok has become one of the most downloaded apps worldwide, along with Meta’s (META) Instagram.
But the large amounts of data collected on the platform and concerns about the Chinese Communist Party’s ability to maintain control over ByteDance have raised alarm for US lawmakers who view TikTok’s ties to China as a national security risk.
TikTok CEO Shou Zi Chew insisted in his congressional testimony that the company stores Americans’ data in Virginia and Singapore, not China. However, the company later acknowledged that there were some exceptions for creator data, as Forbes reported.
“The Chinese government has broad legal powers to pressure companies on national security issues,” said Colin Costello, CFIUS and national security counsel at law firm Freshfields. “From the perspective of someone who sees the Chinese government as an enemy and a very capable enemy, the question is: Has it been used, but can it be used? “And from the perspective of the authors of this bill, the answer is yes.”
This isn’t Beijing’s first response to US threats of a TikTok ban.
In 2020, after former President Donald Trump signed an executive order calling for a ban on TikTok and WeChat in the United States, ByteDance immediately moved to update its export control rules. The changes restricted the export of “technology based on data analysis for personalized information recommendation service.”
Rhodium Group director Reva Goujon expects Beijing to similarly intervene if the Senate passes the House bill and President Joe Biden signs it to “show its own resistance against the United States.”
But China’s own economic reality and the general slowdown in foreign investment may also affect Beijing’s calculation of the scale of its response. Foreign direct investment in China fell to its lowest level in 30 years in 2023, driven in part by geopolitical tensions and concerns about an unpredictable business environment.
“With China’s economic difficulties already in full relief, Beijing needs to weigh the risk of further alienation of foreign investors,” Goujon said. “More defensive moves on export controls, data security or cybersecurity measures will only push companies further down the diversification path.”
This hasn’t stopped Beijing from responding in the past. Major American social media and online platforms, including Alphabet’s Google (GOOG), Meta’s Facebook and Snapchat (SNAP), are already banned in the world’s second-largest economy.
The government also banned operators of critical domestic infrastructure from buying Micron’s (MU) products last year after Washington imposed export controls on key American components and chipmaking tools. Months later, China ordered employees at central government agencies to stop using Apple’s ( AAPL ) iPhones, citing national security concerns.
If passed in the Senate, the TikTok bill sets a six-month period for TikTok to separate from ByteDance; It’s a challenging scenario given the complexity of separating US assets from a global application.
Chorzempa said Beijing is unlikely to approve any deal, regardless of price tag or corporate structure, in part because of what TikTok represents: a global social media success story made in China.
“If Beijing is considering a ban on the US market rather than losing global control [over an app]“It is not clear to me whether he would prefer to divest and pay existing shareholders rather than lose this channel,” Chorzempa said.
In part, he added, this is because “the sheer number of Chinese actions over the last few years have made it clear that shareholder interests and shareholders’ financial interests are not very high on the list of priorities for the Chinese government.”
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