China is unlikely to approve any TikTok deal that doesn’t keep source code secret
Beijing appears to be souring on the TikTok deal. After a series of state media editorials indicated this attitude, the Wall Street Journal reported that Chinese Commerce Ministry officials are skeptical of allowing American companies to inspect TikTok’s algorithm.
The past week has seen a very Trumpian news cycle regarding TikTok, the ByteDance-owned app that was set to be banned from U.S. app stores on September 20. Right before that, President Trump gave his “blessing” to a TikTok deal involving Oracle and Walmart, pushing back the ban on TikTok to September 27.
Trump’s impulsiveness and inattention to detail then immediately cast doubt on the deal, again:
- Trump said that TikTok would create a $5 billion education fund, but this “provision came so late that when it was announced, TikTok and its Chinese parent company weren’t aware it was part of the plan,” the Wall Street Journal reported.
- Trump said that if Oracle and Walmart “don’t have total control, then we’re not going to approve the deal,” but “total control” never would have described this deal — it might have only described the Microsoft deal that was rejected.
- Oracle will merely be able to “review TikTok’s source code and software to make sure there are no back doors for the Chinese government to gain access to data,” the WSJ said, not alter the code or own it. ByteDance was set to remain the owner of TikTok’s algorithm.
Beijing now appears to be souring on the deal. A series of state media editorials first made that indication:
- September 22: TikTok extortion deal is unpalatable gambit / Global Times
- September 23: No disguising proposed TikTok deal is a dirty and underhanded trick / China Daily
- September 24: Commentary: The TikTok deal, a brazen heist / Xinhua
But state media, especially outlets like the Global Times, are sometimes unreliable indicators of actual policy in Beijing, even if they do indicate attitudes among much of Chinese officialdom.
The policy will come from a technology export review, which Beijing indicated last month would be required for any TikTok deal involving its proprietary algorithm. ByteDance said this week that it had applied for that tech export license, Reuters reported, and it “can take up to 30 days to obtain preliminary approval to export such technology.”
Officials at the Chinese Commerce Ministry are “troubled by conflicting accounts of who would have ultimate control of TikTok’s world-wide operations,” the Wall Street Journal reports today.
They have also been concerned about reports that U.S. parties in the agreement would be allowed to review TikTok’s source code…
In the eyes of Chinese officials, the TikTok deal is broader than simply a transaction by one company…TikTok’s fate touches upon China’s “core interests,” such as protecting Chinese-developed intellectual property from falling into foreign hands…
One person said ByteDance’s staff was reprimanded by government officials for not considering China’s interests when negotiating the deal.
Even so, another person said the Chinese side still sees room for negotiation over the deal. For Beijing, Mr. Trump’s agreement to delay the ban until after the November presidential election indicated his desire not to alienate the young American voters who use TikTok, and that concern would work in China’s favor, the person said.
We imagine the Trump administration will not be amused if Beijing tanks the deal and calls it attempted intellectual property theft. But right now, that looks like where things are headed.
