Last week, Chinese authorities lamented a lack of “fairness” in the United States when a House measure was quickly passed requiring Chinese business ByteDance to sell its popular social media platform TikTok.
China’s foreign ministry spokeswoman blasted the US of using national security as a ruse to “willfully suppress other countries’ superior companies,” implying that the Chinese government would oppose any forced sale of its most popular social media platform.
However, analysts warn that, aside from blocking a spin-off, China’s choices for potential retaliation against the US are limited due to the country’s present economic situation and its own censorship regime.
The current legislative measure is another twist in a years-long battle to curb the scope and impact of a social networking programme that now has over 170 million users in the United States.
TikTok, which launched in 2017 as the foreign version of parent firm ByteDance’s successful Chinese app Douyin, has become one of the most downloaded applications worldwide, alongside Meta’s (META) Instagram.
However, the large amounts of data collected on the platform, along with worries about the Chinese Communist Party’s potential to impose influence over ByteDance, have alarmed US senators, who have labelled TikTok’s links to China a national security danger.
“The Chinese government does have broad legal authorities to compel corporations in matters of national security,” said Colin Costello, a CFIUS and national security expert at Freshfields. “So, from the perspective of someone who sees the Chinese government as an opponent, and a very capable adversary, the question is not whether it has been used, but whether it can be used. And the answer, from the standpoint of those who drafted this legislation, is yes.”
Beijing has already responded to threats of a TikTok ban in the United States.
In 2020, when former President Donald Trump issued an executive order essentially banning TikTok and WeChat in the United States, ByteDance moved quickly to revise its export control policies. The amendments prohibited the export of “technology based on data analysis for personalised information recommendation service.”
According to Reva Goujon, a director at Rhodium Group, Beijing will interfere similarly if the Senate adopts the House measure and President Joe Biden signs it into law to “demonstrate its own resistance to the US.”
However, China’s own economic reality and a general slowdown in foreign investment may affect Beijing’s decision on the magnitude of its response. Foreign direct investment in China sank to a 30-year low in 2023, dragged down by fears about geopolitical tensions and an unstable economic climate.
“Beijing needs to weigh the risk of further alienating foreign investors when China’s economic challenges are already on full display,” Goujon said in a statement. “More defensive moves, whether on export controls, data security, or cybersecurity measures, will only drive companies deeper down the diversification path.”
That has not prevented Beijing from reacting in the past. Major American social media and internet platforms, such as Alphabet’s Google (GOOG), Meta’s Facebook (FB), and Snapchat (SNAP), have already been outlawed in the world’s second-largest economy.
Last year, the government prohibited essential domestic infrastructure operators from acquiring Micron (MU) equipment after Washington imposed export limits on crucial American components and chipmaking tools. Months later, China directed staff of central government institutions to cease using Apple (AAPL) iPhones, claiming national security concerns.
If enacted by the Senate, the TikTok measure would impose a six-month deadline for TikTok to divest from ByteDance, a difficult prospect given the complexities of separating US assets from a worldwide application.
Chorzempa believes Beijing is unlikely to accept any purchase, regardless of price or corporate structure, in part because TikTok represents a worldwide social media success story born in China.
“If Beijing is looking at a ban in the United States market compared to losing global control [over an app], it’s not clear to me that it would prefer divestment and a payout for the existing shareholders over the loss of that channel,” he added.