Chinese export rules could hamper TikTok’s US sale

31 Aug 2020123 Views

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New rules in China could mean that TikTok needs to secure a licence before it can sell its AI technology to a US company.

On Friday (28 August), China’s ministry of commerce introduced new export rules relating to AI technology that could potentially impact the sale of TikTok’s US operations, according to the New York Times.

China’s updated export controls now cover a variety of technologies considered sensitive, which may affect the algorithm behind TikTok’s personalised recommendation engine.

Chinese state news agency Xinhua published a comment by a professor from Beijing’s University of International Business and Economics, who said the new rule would mean that TikTok owner ByteDance may need to apply for a licence to sell its technology to a company in the US.

According to the Wall Street Journal, a Chinese government official told Xinhua that ByteDance should “seriously and cautiously” rethink its plans to sell TikTok to a company in the US.

The potential implications

The New York Times reported that Beijing’s apparent “displeasure” about the sale of TikTok to a US buyer could “scare off” Microsoft and Oracle, the two companies currently said to be bidding for the video-sharing social media platform.

Scott Kennedy, senior adviser at the Washington Center for Strategic and International Studies, told the publication: “At a minimum [the Chinese government are] flexing their muscles and saying, ‘We get a say in this and we’re not going to be bystanders.’ It could be an effort to outright block the sale, or just raise the price or attach conditions to it to give China leverage down the road.”

ByteDance, Oracle and Microsoft have yet to comment on the changes to China’s export rules and how this may affect any proposed deals.

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According to the New York Times, China has previously used its bureaucratic powers to block commercial deals, including a $44m acquisition proposed by Qualcomm to buy Dutch competitor NXP Semiconductors. After 20 months of consideration, regulators in China neither rejected or approved of the transaction, causing the deal to fall through in 2018.

Ongoing race to sell TikTok

For weeks, the ByteDance-owned social media platform has dominated headlines with news about a potential sale of its US business. It follows executive orders from the Trump administration earlier this month that could see the app banned entirely in the US unless it is sold by its Chinese parent company.

No deal has been announced yet, but Microsoft, Oracle and others have been linked with bids to purchase the company.

On Friday (28 August), Bloomberg reported that TikTok rival Triller has also been considering purchasing the company, with the help of London-based investment firm Centricus. A person familiar with the matter told Bloomberg that Triller and Centricus were offering $20bn for TikTok’s operations in the US, Australia, New Zealand and India.

TikTok called the reports “preposterous” and when questioned on the potential acquisition bid, a TikTok spokesperson replied: “What’s Triller?” A spokesperson from Triller had not responded to Bloomberg, however, Triller executive chair Bobby Sarnevesht confirmed his company’s the bid to The Verge.

“We submitted an offer directly to the chairman of ByteDance through Centricus and have confirmation it was received. We didn’t make an offer to TikTok, they aren’t involved in this at all,” he said.

“We made an offer to ByteDance and are dealing directly with the chairman only. Either people multiple layers down aren’t aware of what is happening on the highest level or they may have their own agendas and aren’t happy about our offer coming in.”

The Verge then reached out to ByteDance for comment, but the company’s spokesperson said it was “unaware of any interest”.

Kelly Earley is a journalist with Siliconrepublic.com

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