‘ByteDance’s CEO needs to be tough and get prepared to withdraw from the US market’
Image from The Stand News. Used with permission.
Since United States’ President Donald Trump threatened to ban TikTok in the U.S. as long as the social media app remained in the hands of a Chinese company, the app’s parent company ByteDance has been scrambling to sell part of its operation to American investors.
An agreement with U.S. companies Walmart and Oracle to establish a new joint-company called TikTok Global finally received Donald Trump’s blessing on September 19 — only to jar against new obstacles days afterwards.
Yet two different interpretations of the deal had emerged this week: ByteDance said that it would retain a majority of 80 percent of TikTok Global under the agreement while Oracle said that as soon as the new company, TikTok Global, was created, ByteDance would lose its ownership stake in the service. In response, Donald Trump stressed on television that the Chinese firm would “have nothing to do with it, and if they do, we just won’t make the deal.”
The confusion seems to stem from the fact that 40 percent of ByteDance is already owned by American investors, which would render the total American shareholding of TikTok Global above 50 percent.
Meanwhile, the editor-in-chief of Chinese state-affiliated outlet Global Times, Hu Xijin, tweeted on Monday that the deal with Oracle and Walmart could still face opposition from Beijing. He said:
Based on what I know, Beijing won’t approve current agreement between ByteDance, TikTok’s parent company, and Oracle, Walmart, because the agreement would endanger China’s national security, interests and dignity.
— Hu Xijin 胡锡进 (@HuXijin_GT) September 21, 2020
While Beijing’s position on the Oracle/Walmart agreement is not yet official, in the recent past other government-affiliated news outlets have correctly anticipated the Chinese Communist Party’s decisions around the sale.
Following an editorial by China Daily slamming a potential agreement between ByteDance and Microsoft as “theft,” Beijing implemented a new set of rules restricting Chinese exports of AI technology.
The new rules forced ByteDance to limit tech transfers in the agreement with Oracle and Walmart — although the U.S. companies will still be able to see TikTok’s source code, ByteDance said.
On Weibo, some Chinese netizens have expressed support for the Oracle/Walmart deal. A popular economics blogger on the platform “Tianjin hero in stock market” （天津股俠）says that the agreement could establish a model for future disputes:
TT的最终方案真是大利好了，一波三折没想到这个结局。第一字节保住了TT控股权，第二，没有转让核心技术和算法，第三保住了美国业务，第四引进甲骨文和沃尔玛，给20%股权，相当于引进战略投资者，第五即将新一轮融资，融资主要给甲骨文和沃尔玛没有损害原老股东利益。这个版本是目前为止中资企业面对美国打压下的最优方案了。
TikTok’s agreement is a good deal. First of all, it keeps ByteDance’s ownership of Tik Tok; Second, it has not sold its core technology and algorithm; third, it saves its U.S business; fourth, it only gives 20 percent holding to Oracle and Walmart as strategic partners; fifth, the new round of capital investment is confined only to Oracle and Walmart and does not harm the existing investors. This is the best solution in dealing with the suppression of Chinese corporations in the U.S.
But for Chinese nationalists, the deal will harm China’s interests. A Global Times’ editorial on September 21 said that the deal would be a de-facto transfer of core technology:
甲骨文可以访问审查TikTok Global的源代码和所有更新内容。由于TikTok的源代码和抖音的源代码应是同源的，这意味着美方将能够洞悉抖音的核心技术。
TikTokGlobal将掌管TikTok 除中国以外世界各地的业务，同时它将阻止中国大陆的IP访问该程序。这意味着美国人通过这一次交易就可以掌控TikTok的全球业务，而且歧视性地排斥中国人访问它。
Oracle would be able to review TikTok Global’s source code and content data. If the source code of Tik Tok and Douyan [the Chinese version of TikTok] is shared, it means that the Americans would be able to access Douyan’s core technology.
Once TikTok Global takes over TikTok’s business over the world, it would block Chinese IPs from visiting the application. This means that Americans can take control of its global business in one single deal and impose discriminatory measures against visits from Chinese netizens.
The editorial also described the deal as an “unequal treaty” – a political term to describe treaties signed between the Qing Dynasty and colonial western powers during the 19th and early 20th Century – and disavowed it as a model for future conflicts:
这些条款非常充分展现了华盛顿的霸凌做派和强盗逻辑，同时损害了中国的国家安全、利益和尊严。字节跳动是一家中国的普通商业公司，美国动用国家力量对它进行打压，强迫它签城下之盟，但中国作为一个国家，而且同样是大国，不会屈服于美方的恫吓，接受一个针对中国企业的“不平等条约”。
…美国是个大市场，如果TikTok受美方控制的重组成为一个模板，意味着中国每一个成功的企业一旦去了美国发展，而且一旦它们有自己的核心竞争力，都会被美国盯上，通过巧取豪夺把它们变成受美方控制的公司，把那些公司在全球打开的市场也都顺势植入美国利益的导向。
The agreement reflects Washington’s bully and thief-like logic. It would harm China’s national security, interest and dignity. ByteDance is an ordinary Chinese corporation and the U.S. has resorted to state power to repress its development and impose an agreement. However, China is also a strong country and it would not submit to U.S. threats and its “unequal treaty” imposed on a Chinese corporate…
The U.S. is a big market. If the restructuring of TikTok becomes a model to enable U.S. control, it means that other Chinese corporations will face the same fate once they become competitive in the U.S. market — they might be taken over by the U.S. and their development in the global market would be serving U.S. national interests
As anticipated, Global Times’ rhetoric has attracted a lot of support on Weibo. Here are two popular responses to the editorial in question:
其实从特朗普种种表现来看，他不敢真的封禁Tik Tok，这涉及到选票。张老总最需要的是硬气，只要敢破釜沉舟，和美国以退出市场为威胁硬刚，必然置之死地而后生！
Judging from Trump’s performance, he would not dare to ban TikTok. Such action would affect the number of votes. ByteDance’s CEO needs to be tough and get prepared to withdraw from the U.S. market. This is an ultimate survival strategy.
大话不要讲了，只有开骂，中国绝不要接受米国的这种算计。想把中国人当傻子一样耍，华为有预见，坚决不和这种流氓国家有任何瓜葛，公平买卖，做得成就做，做不成就算了，你打压，我自强，此路不通，还有其他路
Stop bluffing. China should not accept such calculative deal. They take us as fools. Huawei has had the gut to cut ties with such a thug-like country. No deal should be made if it is not fair. Self-strengthening is the way to deal with oppression, there will be another way out.