Beijing unlikely to block ByteDance deal with Oracle, say experts

ByteDance’s deal with Oracle over the video-sharing platform TikTok is unlikely to be blocked by Beijing, domestic analysts say, since it does not involve the sale of any source code or Chinese data to the US.

Under the terms of the agreement, which now requires approval from the US government, ByteDance will become the majority shareholder in a new US-based company that runs TikTok’s global business.

As ByteDance’s “technical partner”, Oracle will independently process TikTok’s US data and possibly data from across the globe, as well as holding a minority share in the new company.

“There is no sale of any asset or any technology,” said one person directly involved in the protracted negotiations, which were carefully calibrated to avoid triggering resistance from either Beijing or Washington.

The person added that the deal was unlikely to require approval from regulators in Beijing. “As an enterprise software company Oracle will just be providing data security with a small minority stake,” the person said.

Public opinion in China has fluctuated over the course of ByteDance’s negotiations with US tech companies, with many on social media criticising the company for “bowing down” to US pressure. Last month, Beijing appeared to hit back at US president Donald Trump’s demand that the company be sold to a US buyer or face a ban in the country, drawing up new export controls that threatened to stop ByteDance from selling TikTok’s algorithm overseas.

Earlier this week, before terms of the deal were clear, Chinese state media stressed that TikTok was not being sold.

“It is probably the best deal that China can greenlight,” said Feng Chucheng, political risk analyst at consultancy Plenum. “This deal saves face in China, and Beijing can declare that TikTok’s key technological advantage — its algorithm — is protected.”

Liu Baocheng, a professor at the University of International Business and Economics in Beijing, said that ByteDance’s retention of majority ownership of TikTok was key to Beijing’s acceptance of the deal. He added that the relative insignificance of the company to China — where its Chinese counterpart Douyin is used instead — was also likely to be a factor.

“The current deal should satisfy the government,” said Mr Liu. “The only concern is whether it constitutes an export of technology, but I don’t think the government would use that as a reason to block the deal — the company doesn’t matter much to the government.”

Wang Congwei, a partner at Beijing Jingshi law firm, agreed, adding that from a data governance perspective China had no interest in TikTok, since it did not contain Chinese user data or operate in China.

ByteDance’s compromise of having a technical co-operation with a US company mirrors China’s own arrangements for many foreign internet services. Social media commentators jokingly dubbed the deal “California Cloud Big Data” — a reference to Apple’s partnership in China, where the government forced it to provide iCloud through a local vendor called Guizhou Cloud Big Data.

“China has successfully exported its data governance regime,” said Mr Feng, adding that if the US approved the deal, it would help China make the case for its own restrictions on foreign tech companies. As part of its trade negotiations, the US had been lobbying China to loosen its entry requirements for foreign cloud providers.

Still, with Microsoft out of the contest for the lucrative social platform, some investors regret the absence of other tech companies that could provide credible assurances on data privacy. “There have been so few choices,” the person close to the negotiations added. But given the huge volume of the TikTok operations, only a handful of companies are big enough to provide such safeguards.

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