China’s new tech export control rules can potentially delay TikTok sale

TikTok logos are seen on smartphones in front of a displayed ByteDance logo in this illustration. (Reuters)

China’s new rules around tech exports mean ByteDance’s sale of TikTok’s US operations could need Beijing’s approval, a Chinese trade expert told state media, a requirement that would complicate the forcedand politically charged divestment.

ByteDance has been ordered by President Donald Trump to divest short video app TikTok in the United States amid security concerns over the personal data it handles.

Microsoft Corp and Oracle Corp are among the suitors for the assets, which also includes TikTok’s Canada, New Zealand and Australia operations.

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However, China late on Friday revised a list of technologies that are banned or restricted for export for the first time in 12 years. Cui Fan, a professor of international trade at the University of International Business and Economics in Beijing, said the changes would apply to TikTok.

Read more: ByteDance founder defends TikTok’s strategy in US, says it faces difficulties abroad

“If ByteDance plans to export related technologies, it should go through the licensing procedures,” Cui said in an interview with Xinhua published on Saturday.

China’s Ministry of Commerce added 23 items -- including technologies such as personal information push services based on data analysis and artificial intelligence interactive interface technology -- to the restricted list.

It can take up to 30 days to obtain preliminary approval to export the technology.

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

TikTok’s secret weapon is believed to be its recommendation engine that keeps users glued to their screens. This engine, or algorithm, powers TikTok’s “For You” page, which recommends the next video to watch based on an analysis of your behavior.

Cui noted that ByteDance’s development overseas had relied on its domestic technology that provided the core algorithm and said the company may need to transfer software codes or usage rights to the new owner of TikTok from China to overseas.

“Therefore, it is recommended that ByteDance seriously studies the adjusted catalogue and carefully considers whether it is necessary to suspend” negotiations on a sale, he added.

China’s foreign ministry has said it opposes the executive orders Trump has placed on TikTok and that Beijing will defend the legitimate rights and interests of Chinese businesses.

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Last Update: Monday, 31 August 2020 KSA 00:03 - GMT 21:03
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