Commentary on Political Economy

Thursday, 6 August 2020

Trump issues ban on US groups dealing with TikTok and WeChat

Demetri Sevastopulo in Washington and Hannah Murphy in San Francisco 10 minutes ago

Donald Trump has barred US companies from dealing with ByteDance, the Chinese owner of TikTok, and WeChat, the messaging app owned by Tencent, as he stepped up a campaign to clamp down on Chinese apps he said were a threat to economic and national security.
Mr Trump issued two executive orders which decreed that US businesses would no longer be able to work with the Chinese groups after a 45-day period. The move comes as Microsoft negotiates to buy TikTok, a popular short-video app, ahead of a September 15 deadline that Mr Trump had previously set.
One US official said the 45-day window would “give Microsoft and other interested purchasers time to reach a deal with TikTok’s owners that adequately addresses the national security concerns posed by the app”.
Mr Trump said the apps captured huge amounts of data about users, creating the risk that Beijing could access the personal information of US citizens and be used to conduct various kinds of spying. He said WeChat also allowed China to monitor its citizens when visiting the US.
“This data collection threatens to allow the Chinese Communist party access to Americans personal and proprietary information, potentially allowing China to track the locations of federal employees . . . build dossiers of personal information for blackmail, and conduct corporate espionage,” he said.
While Mr Trump had previously signalled that he was preparing to ban TikTok unless the app was sold to a US company, his move against WeChat was the first time his administration targeted the popular app.
Tencent shares fell as much as 4.2 per cent following the announcement.
Microsoft has been in negotiations with ByteDance to buy TikTok in the US, Canada, Australia and New Zealand. The executive order draws a clear line in the sand in terms of a deadline for any deal, meaning the two parties must race to hammer out the precise details of what could be a tricky separation of parts of TikTok’s overseas business.
People familiar with the deal have since told the Financial Times that the US technology company was also considering acquiring TikTok’s global business, including its European and Indian arms. Mr Trump said this week that he supported the move by Microsoft, but suggested it would be better to buy the global operations.
A broader deal would still not resolve the difficulty of carving out TikTok’s technology from ByteDance. According to employees of the Chinese company, ByteDance was already working on separating the data and algorithms between China and the rest of the world.
Tencent, the Shenzhen-based technology company, opened a US office in 2013 with the aim of expanding WeChat’s popularity in the US. WeChat does not disclose how many of them are in the US but the app is used by the Chinese diaspora and businesspeople to deal with those in mainland China, where the app is a must-have utility.
Mr Trump invoked the 1977 International Emergency Economic Powers Act to justify the bans on US companies dealing with ByteDance and with Tencent in connection with WeChat. The law provides a broad mechanism for the US government to impose restrictions related to companies deemed to pose a threat.
The move to target the apps comes a day after Mike Pompeo, US secretary of state, signalled that the crackdown on TikTok was part of a broader campaign against Chinese tech companies with access to the data of US citizens.
The White House is focusing on mobile apps, following a largely successful campaign to convince US allies to purge Huawei, the Chinese telecoms equipment provider, from their next generation 5G networks.
Mr Trump has dramatically shifted his posture on China in recent months, as he tried to blame Beijing for the global spread of coronavirus. He had taken a softer line on China last year, in an effort to promote negotiations aimed at ending the trade war between the economic powers. But after concluding a first phase deal and following the outbreak of Covid-19, he has adopted a harsher stance on Beijing.

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