China Responds To US Restrictions With Some Of Its Own

Matty-Sways

As tensions between China and the US heat up over TikTok's potential ban, China introduces its own restrictions on IP.

Suitors for TikTok and the app’s U.S. operations have run into complications as new Chinese restrictions that appear designed to affect a potential sale were announced Friday. Then new restrictions are on the export of artificial-intelligence technology. This caused Microsoft Corp., Walmart Inc. and Oracle Corp. to run to the offices to review how it could effect their bids for a portion of the app.

ByteDance was expected to enter into exclusive discussions with one group of suitors over the weekend following receiving bids on Friday. Microsoft and Walmart have been working together, and Oracle also has been joined by ByteDance investors General Atlantic, Sequoia Capital and Coatue Management LLC.

“We are studying the new regulations that were released Friday,” ByteDance General Counsel Erich Andersen said. “As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the U.S. and China.”

These regulations lead the US to believe that the Chinese government is trying to answer President Trump's executive order demanding TikTok's U.S. operations be sold or that it face a ban. (TikTok has said it hasn’t and won’t share data on U.S. users with the Chinese government.) China’s move to give the government a say in the outcome is an attempt to level the playing field with the U.S. and could affect other Chinese companies.

“We’re seeing geopolitical tension between the U.S. and China, and we are in the middle of that,” TikTok interim head Vanessa Pappas said in mid-August.

It is unclear even to those involved in discussions of a potential sale how China will enforce the new rules. It could cover such computing and data-processing technologies as text analysis, content recommendation, speech modeling and voice-recognition, which can’t be exported without a license from local commerce authorities.

On Saturday, China’s official Xinhua News Agency quoted a government trade adviser as saying that ByteDance should study the new export list and “seriously and cautiously” consider whether or not it should halt its sales negotiations.

ByteDance said on Sunday that it was aware of the new restrictions and will “strictly comply with” China’s regulations on tech exports.

The ban not only restricts technology exports, but reaches the agriculture, pharmaceutical and other industries. The restrictions specify new rules on laser technology, cryptography, chip design and other high-tech categories. In addition to TikTok, the White House also has targeted a growing number of Chinese tech firms, namely telecom giant Huawei Technologies Co. and Tencent Holdings Ltd.

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