China threatens to kill TikTok deal over ‘ dirty’ Trump tactics

Just a few days ago, the TikTok deal looked like a win for China. Now its state- run media are denouncing it as “an American trap” and a “dirty and underhanded trick”.

The quick shift in sentiment shows the complications of concluding an agreement that is about much more than finding a proper valuation for an addictive video app that has enthralled teenagers around the world. It also has big ramifications for how the world’s biggest economies handle security threats related to new technologies that will drive growth over the next few decades.

For China, the political stakes are similar to the marathon trade talks that ended with a Phase One deal in January. Any agreement that makes it look like the Trump administration forced China’s hand could hurt President Xi Jinping, who has repeatedly hailed the Communist Party’s emergence as a great power in contrast to the humiliations suffered under colonial powers centuries ago.

“Beijing basically doesn’t want to set a precedent where the US can be allowed to unilaterally flex in this way,” said Kendra Schaefer, head of digital research at the Trivium consultancy in Beijing. “Having some role to play in the decision balances things out a bit.”

Over last weekend, Oracle and Walmart agreed to take 20% of a new US-based entity called TikTok Global that would ringfence the app’s international operations and data, said to be worth up to US$ 60 billion ($ 82.5 billion). ByteDance appeared to get most of what it wanted, including keeping the valuable AI algorithms for its short- video app.

That appeared to appease both Donald Trump, who declared victory and called off a ban on TikTok, as well as China’s most nationalistic media. Hu Xijin, the influential editorin-chief of the Party-run Global Times, said the deal was “still unfair but it avoids the worst result”.

By Sept 21, signs of trouble emerged. ByteDance asserted that it would remain in control of TikTok Global, appearing to contradict Trump’s earlier comments about how Americans would direct the new entity. Oracle issued a statement backing Trump’s view, and the American president warned he could still torpedo a deal if US parties did not have a majority hold.

On Sept 23, two of China’s most prominent state-backed media mouthpieces denounced the deal.

“What the United States has done to TikTok is almost the same as a gangster forcing an unreasonable and unfair business deal on a legitimate company,” the state-run China Daily wrote in an opinion piece. Hu from the

Global Times tweeted that Beijing likely would not approve the current agreement as it endangered China’s national security.

The saga has sparked “complete disbelief” among Chinese leaders, said Gao Zhikai, a former diplomat and translator for late leader Deng Xiaoping who is now chair professor at Soochow University. “China wants to emphasise that the Chinese companies’ legitimate rights cannot be violated without consequences.”

On Sept 23 in the US, ByteDance asked a federal judge to stop Trump from implementing a ban on TikTok that is scheduled to begin this weekend.

It is unheard of for the major parties to a mega-deal to diverge so drastically on its basic contours. While Trump has yet to give his final sign-off and the deal therefore remains in flux, Beijing will intervene if it feels Byte

Dance risks giving up too much, Trivium said in a Sept 22 note. —

Bloomberg