China’s new tech export rules pose further threat to TikTok’s survival in the US

31-Aug-2020 Intellasia | South China Morning Post | 8:57 AM Print This Post

TikTok’s race to keep its operations going in the United States may face a further political hurdle after China imposed new restrictions on technology exports.

The popular video-sharing app has been scrambling to reach a deal with an American buyer after Donald Trump ordered it to stop or sell its operations in the US.

But the new rules, which will require government approval for the export of certain technologies, are likely to affect its Chinese parent company ByteDance.

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“ByteDance has a number of cutting-edge technologies in artificial intelligence and other fields, and some technologies may be covered by the adjusted list,” Cui Fan, a professor of international trade at the University of International Business and Economics in Beijing, told state news agency Xinhua on Saturday.

On Friday China’s Ministry of Commerce and the Ministry of Science and Technology updated the list of technology exports that are banned or restricted for the first time since 2008.

Two articles are likely to affect ByteDance directly: Article 18, which covers some forms of artificial intelligence such as voice recognition, and Article 21, covering data analytics and content recommendation.

Exports covered by the list will need prior permission from the Ministry of Commerce, which has 30 days to decide whether to give the go-ahead.

Exporters are also required to submit the deal to the government for review and apply for an export licence and the decision will take up to 15 days.

Cui said that ByteDance’s international businesses, including TikTok, had been able to achieve rapid development because of strong domestic technical support.

“It continuously provides the latest core algorithm services to overseas companies, which is a typical technical service export,” he added.

“Therefore, it is recommended that Bytedance carefully studies the adjusted list, to consider whether it is necessary to suspend the substantive negotiation of related transactions, perform the statutory declaration procedures, and then take further actions as appropriate.”

China has already been strengthening its export controls in the wake of the trade war with the US.

The new amendments cover a wide range of areas, including biotechnology used in vaccines and agriculture, and have been in the works for two years.

However, the changes come at a critical time for TikTok, which has been given a September 15 deadline to cease or sell its operations by Trump, who cited security concerns.

Shaun Rein, managing director of China Market Research Group, said: “By doing this type of export list, potentially this is a way for the Chinese government to get involved and offer protection to Chinese companies.

“But it also puts the Chinese companies under a massive squeeze, because they don’t know what to do right now. They are caught up by two superpowers fighting for dominance for the next 10, 20 years.”

Rein said the Chinese government was trying to hit back as US technological dominance, but “it’s hard because China has already banned most of the [US] social media companies from operating”.

Chinese companies are caught up by two super powers fighting for dominance

Shaun Rein

Alex Capri, a visiting senior fellow at the National University of Singapore questioned whether ByteDance was using technology that was unique to China.

“I do think the Chinese digital platforms have a massive pool of data that they have access to and they can do a lot of things to, but I personally am not convinced that the artificial intelligence is uniquely advanced to the point where [non-Chinese] companies … would be hurt not getting access to it,” Capri said.

“There is genuine concern on the Chinese part if American companies do acquire Chinese interests, systems and Chinese business models, they would somehow be accessing and giving up technology they see as ground breaking. Or possibly they’ll see it as granting Western agents forensic access to Chinese technology.”

ByteDance did not respond to requests for comment.

Despite the efforts to find a US buyer Microsoft and Oracle are reported to be among the front runners Reuters reported on Friday that ByteDance had told TikTok engineers to make contingency plans if it needed to shut down its US operations.

Rein said that it was possible that TikTok would have to close its US business if ByteDance did not get the green light from Chinese regulators.

‘The founder [Zhang Yiming] is stuck. He is getting screwed over by all sides, essentially,” Rein added.


Category: China

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