TikTok ban breaks new ground for US tech controls

The US TikTok ban takes the tech contest with China into new territory. The law that has just passed Congress gives its parent ByteDance 270 days in which to dispose of TikTok's hugely popular US business – unless, as is quite possible, it is struck down by the Supreme Court.

To now the US has placed limits on 5G equipment supply, advanced technologies, stock exchange and higher education, but this is its first attempt to limit Chinese influence on information or media. 

In doing so it's introducing an element of China-style Internet governance, which holds that each country set its own rules and practices, rather than the open, internationalist approach advocated by the US and friends for the past 30 years.

China isn't taking the win. Instead, it has criticized the US for breaching its freedom of expression principles. And while it has not hesitated to block US social media firms from entering China, it says it will oppose any attempt by the US to do the same.

Officials have repeatedly vowed to block the divestment of the short-video service on grounds that it involves the export of advanced algorithms.

Assuming the law survives its expected court challenges then, that could set the ground for another significant standoff on hi-tech.

Crimp the algorithms

In the end, however, as this paper for the Carnegie Endowment for International Peace argues, the most likely outcome is China will allow the sale but curtail the algorithms. This would solve the political problem but obviously make the asset much less desirable to investors.

Beijing-headquartered ByteDance already has some significant foreign investors, most notably US financier Jeff Yass, whose firm Susquehanna International Group (SIG) owns around 15%, according to the Financial Times (paywall applies).

Yass, a major Republican Party donor, made headlines following his meeting with Donald Trump in March, after which the would-be future president, who had tried to outlaw TikTok when in office, declared he would oppose any ban.

But ByteDance’s most important shareholder is probably state-backed China Internet Investment, which has a 1% golden share and a seat on the board – an arrangement common to all China's Internet giants.

The board position, held by Wu Shugang, the former chief censor at China's Internet watchdog Cyberspace Administration of China (CAC), explicitly allows a say in business strategy, investment and M&A.

This government presence gives the party and the state enormous influence over content and the direction of the company. TikTok, based in the US and Singapore, argues it's a separate operation from its parent.

But plenty of informed critics disagree.

This includes a group of Australian researchers who point out that TikTok and its Chinese counterpart Douyin "share personnel and technological resources, have parallel management structures, and permit data sharing with each other."

In their submission to an Australian senate inquiry into social media disinformation, they said content analysis showed TikTok recorded higher levels of pro-CCP (Chinese Communist Party) propaganda and disinformation than other social media platforms and had a "demonstrated capacity" to calibrate content in the service of party propaganda.

ByteDance's alignment with Beijing was so close it should be regarded as a hybrid state-private entity, they added.

Of course, TikTok is hardly alone among US social media platforms to be accused of spreading disinformation. It’s just that so far it is the only one to face any legal consequence.

But the many layers of this issue and the deep distrust between US and China tell us this problem has a long way to run yet.