Trump, Microsoft and ByteDance Face China's Ire

Matty-Sways

The Chinese are extremely upset over the vocal way Trump is pressuring TikTok's sale to Microsoft.

On Monday, President Trump confirmed he is open to a deal in which Microsoft or another U.S. company buys TikTok, and mentioned the government should receive payment for clearing a purchase.

Speaking to reporters at the White House, Mr. Trump described the Sunday conversation he had with Microsoft CEO Satya Nadella over the company’s interest in buying TikTok from its Chinese owner, Beijing-based ByteDance Ltd.

“I said, ’Look it can’t be controlled for security reasons by China,’” Mr. Trump said. “Here’s the deal, I don’t mind whether it’s Microsoft or somebody else—a big company, a secure company, a very American company buy it.”

Microsoft has said it is interested in buying TikTok operations in the U.S., Canada, New Zealand and Australia, leaving other parts of the business in Chinese ownership.

“I did say that ‘If you buy it…a very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen.’ Right now they don’t have any rights unless we give it to them.”

Its believed Mr. Trump has set a deadline of Sept. 15 before he bans TikTok. Microsoft said it would move quickly to pursue discussions with ByteDance . (TikTok says it has 100 million users in the U.S.)

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These statement and a general distrust for Washington has caused the Chinese to bring to light a long-held suspicion that the U.S. aims to sabotage the country’s efforts to grow its technology. After months of Bytedance (TikTok owner) making moves including hiring and american CEO to appease Washington. The President continues to take a adversarial stance against the app. If the deal is completed it means China will likely lose control over its first true global internet sensation, a potential top-tier global technology giant, in the worlds biggest untapped market. How would it effect other Chinese companies like Alibaba Group Holding Ltd. and Tencent Holdings Ltd., whose mobile app WeChat has been mentioned by top U.S. officials as a potential target.

Over the past two years, Washington’s national-security concerns revolved around Huawei Technologies Co., a Chinese telecom giant that the U.S. has tried to blacklist world-wide with increasing effectiveness.

“Stop politicizing economic and trade issues, stop abusing the concept of national security and stop pursuing policies of discrimination and exclusion,” Chinese Foreign Ministry spokesman Wang Wenbin said at a regular briefing, in words aimed at Washington.

A Communist Party tabloid, derided the situation as “the hunting and looting of TikTok by the U.S. government in conjunction with U.S. high-tech companies.”

Other Chinese social media users also aimed their ire at Zhang Yiming, Bytedance’s 37-year-old founder, for acquiescing to the pressure—a move that some Chinese commenters ridiculed as “kneeling” to Washington.

Mr. Zhang told staff in a Monday afternoon letter:

“I hope everyone can maintain good morale amid the commotion and challenges,” Mr. Zhang wrote, saying that Bytedance’s desire to become a global company hasn’t changed. “Trust that the company can make good decisions in complex situations.”

Unlike other Chinese tech titans, which have largely copy other platforms, TikTok’s breakout success has been the product of its own innovation, said Matthew Brennan, a China-based tech consultant.

“TikTok was the moment when China technology went from ‘copy to China’ to ‘copy from China,’” he said. “Short video had first found more traction in China, and when Bytedance moved into the U.S. market, they were leading the big trend.”

Selling the US operations of TikTok is not as easy as it sounds. Engineers would have to disentangle TikTok’s technical back end from its Chinese sister app Douyin, with which it shares some of the code used in its recommendation engine—the secret sauce that drives TikTok’s notoriously addictive video feed, according to people familiar with the company.

According to The Wall Street Journal, Bytedance racked up 140 billion yuan ($20 billion) in sales last year, mostly from advertising. It expects to have revenue of 200 billion yuan this year. Bytedance’s investors include SoftBank Group Corp., as well as U.S. investment firms General Atlantic and Sequoia Capital. In March, New York-based Tiger Global Management invested in Bytedance at a valuation of $100 billion to assist in the company’s path toward a U.S. initial public offering.

Besides TikTok, other Chinese tech companies could face the wrath of U.S. officials including Secretary of State Mike Pompeo and Peter Navarro who threatened to ban WeChat. Like TikTok, WeChat has been kicked out of India (largest overseas market - 69 million users), following this year’s deadly skirmish on the China-India border. WeChat has 19 million US users.

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