China Promises To Retaliate If TikTok Forced To Sell
China will retaliate if the U.S. forces ByteDance’s app TikTok to leave the country, or sell to an approved U.S. buyer. They said they’d go to the World Trade Organization, an organization currently in complete limbo.
President Trump this week said the U.S. would ban TikTok if it is not sold to Microsoft MSFT by September 15. Microsoft and ByteDance informed the Committee for Foreign Investment in the U.S. (CFIUS) that they were in talks.
“For a while, without providing any evidence, the U.S. has stretched the concept of national security and abused its state power to bring down certain non-U.S. enterprises,” Chinese Foreign Affairs Ministry spokesman Wang Wenbin said at a Tuesday press conference. “Such practice goes against market economy rules and the WTO principles of openness, transparency and non-discrimination. It is a blatant act of bullying, to which China firmly opposes.”
Speaking of market economy rules, Twitter, Instagram, Snapchat, Gmail, Facebook and YouTube are not allowed in mainland China.
U.S. officials claim that TikTok is collecting data on U.S. users, which is something that nearly every tech company does. But that doesn’t matter. CFIUS has rejected the acquisition of at least two U.S. companies by China firms citing the potential access China would have to data on U.S. citizens.
“The U.S. cited national security as the grounds for its oppression of relevant businesses, but this turns out to be a flimsy excuse they made,” Wang continued. “Relevant companies do business in the U.S. in accordance with market principles and international rules, and abide by U.S. laws and regulations. However, the U.S. side imposes restrictions and oppresses them on the pretext of trumped-up charges, which is nothing but political manipulation. If the U.S. goes this way, then any country can take similar measures against any U.S. The U.S. must not open Pandora’s box, or it will suffer the consequences.”
Nick Marro, lead analyst for global trade at The Economist Intelligence Unit, thinks TikTok will not be alone in meeting Washington’s ire. Huawei was the first. TikTok is the second. A third is only a matter of time.
The big question now is how China responds to this — there aren’t any obvious avenues for tit-for-tat retaliation. If they banned Apple AAPL , or made it harder for Apple to source from Foxconn factories, it would be more of a problem for China than for the Apple.
China already blocks all of the major foreign social media platforms from its market, so saying no to Twitter or Instagram isn’t an option.
So Marro thinks there’s a chance China does something more drastic. What? No one knows for sure. Pulling out of the phase one trade deal might be a blessing in disguise for President Trump, who recently said that he is no longer attached to that deal due to the pandemic; a pandemic he blames wholly on China.
“U.S.-China ties are going to get worse before they get better,” says Marro. “Over the next few months leading up to the presidential election, we could see the U.S. targeting other high-profile Chinese firms. Companies need to prepare for the associated operational and compliance risks that could come with that.”
He expects more high profile China tech companies are at risk of being targeted by the U.S.
U.S. officials also recognize that pressuring China too hard could damage any potential recovery later in 2020. China could stop importing agricultural goods and lumber, for example, both part of the trade deal and both key sources of income for rural counties from Virginia to Kansas. “We’d expect U.S. authorities to move cautiously in the near-term, even if they end up laying the groundwork for more damaging policy maneuvers in the future,” Marro says.
Between blacklists at the Commerce Department that ban selling of computer hardware to certain China companies, to allegations of spyware in Chinese apps, the tech war has become just another front in the trade war; a war many now refer to as the China version of the Cold War.
Would a Joe Biden presidency change course?
Judging by last week’s Senate Subcommittee on Security hearing on China, there is bipartisan consensus on containing China that is not much different from the consensus to constrain the Soviet Union.
Alaska Senator Dan Sullivan, who chairs that Subcommitee, said the U.S. needed a “strategy of containment” against China. No one disagreed with that sentiment.
“These dynamics are part of a trend that will persist regardless of who wins the White House in November,” says Marro. “The reality right now is that there is a very strong bipartisan current against China in Washington. American companies should prepare for a future where investment frictions with China persist into the long-term, and what that might mean for their global growth strategies in the post-pandemic period.”