The US is asking the Chinese owners of Bytedance to sell their shares.
(Photo: Reuters)
Beijing The US government is increasing pressure on the Chinese technology group Bytedance to sell the short video app Tiktok. Otherwise there is a risk of the platform, which is particularly popular with young people, being banned on the US market, the company announced on Wednesday.
The US accuses Tiktok of endangering national security. The company denies that. A forced sale would also not solve the alleged security risk, the company emphasized in a statement. The US President’s Office declined to comment.
As a subsidiary of a Chinese company, Tiktok is under increased surveillance. US authorities accuse the company of using the app to manipulate or spy on Americans.
Tiktok promises efforts in data protection
Tiktok boss Shou Zi Chew is scheduled to testify before a US Congress committee next Thursday. Among other things, it is said to be about data protection and the company’s relations with the Communist Party (KP), which is in power in China.
Last year, Tiktok agreed to cooperate with the US tech group Oracle to store American user data locally and have its software checked. In addition, a three-person supervisory board approved by the US government is to be set up.
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Overall, the company committed to investing $1.5 billion to protect US users’ data and content from being accessed or influenced by the Chinese government. The Committee on Foreign Investments in the USA (Cfius) is said to have called for a split, the Wall Street Journal reported, citing insiders.
If the US is actually concerned with protecting national security, a change of ownership is not a solution, according to the Tiktok statement. Rather, transparent protective measures for data and systems of local users on site in the USA, coupled with supervision by third parties, are the best way. This has already been introduced.
More and more countries are critical of Tiktok
In December, Tiktok had to admit that employees had spied on the personal data of two journalists. This included, among other things, the IP addresses, which can reveal where a person is located. The British newspaper “The Guardian” reported at the time with reference to an internal email that possible sources of the journalists were to be identified based on the information. The employees were fired. But the case illustrates the problem that companies in China can be obliged to cooperate with the authorities.
The app is also under surveillance in other countries. The US Congress, the Canadian government, the EU Commission and the European Parliament have ordered that the program no longer be used on service devices. In mid-February, Bytedance announced that it would open two more data centers in Europe.
In doing so, the company hopes to allay security concerns from authorities and ease pressure from regulators. India banned the app outright after a geopolitical row with China. At the time, the government referred to a law to protect the “sovereignty and integrity of the country”.
The Chinese government condemns the US action against Tiktok. Washington would “overuse the concept of national security and abuse state power to repress foreign companies,” a State Department spokeswoman said recently. In China, foreign social media such as Facebook, Twitter, WhatsApp, Youtube and others are blocked. Instead, local providers such as Bytedance or Tencent dominate the market.
Still, Tiktok management is currently discussing the possibility of splitting off from the Chinese parent company to allay security concerns. This is reported by the Bloomberg news agency, citing insiders. However, a sale or a partial IPO is viewed as the last resort. The Chinese government would have to approve such a transaction. According to Bloomberg estimates, Tiktok’s US business could be valued at $40 billion to $50 billion.
State owns “golden share”
According to Tiktok leadership, 60 percent of Bytedance shares are owned by global investors including Sequoia Capital and KKR Japan. The remaining 40 percent belong to the employees and the founders of the company.
However, in the course of the regulatory campaign against tech companies in China, Bytedance was forced to sell a one percent stake in 2021 to a state investment company that is subject to the powerful Internet supervisory authority CAC. This is referred to as a so-called “golden share” because the state’s influence on the company is greater than a normal one-percent stake would suggest. This is also made clear by the fact that a representative of the Communist Party has been on the board ever since.
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