TikTok’s US sale put at risk by new Chinese tech rules

ByteDance’s hopes of reaching a deal to sell the US operations of its TikTok video app in the coming days have been thrown into doubt after Beijing announced new rules governing technology exports.

China’s Ministry of Commerce revealed late on Friday that the government had expanded its list of technologies subject to export controls to include new rules related to artificial intelligence.

The updated list of controlled exports, which had not been changed since 2008, added restrictions for “personalised information recommendation services based on data analysis”. Inclusion on the list means companies must obtain additional government approvals for the export of certain technologies.

ByteDance-owned TikTok is built on algorithms that analyse user behaviour to push personalised content.

People close to the TikTok sale negotiations said the Chinese government’s decision could derail ByteDance’s plans to reach a preliminary agreement, which was expected as early as this week. Any deal would now take longer to assess in light of the export control changes, the people said.

ByteDance could still reach an agreement soon with a US buyer for TikTok, the people said, but with the added uncertainty that any deal might face opposition from the Chinese government.

“[Zhang] Yiming is trying his best to do the right thing but there are a lot of things out of his control,” said one person involved in the negotiations, referring to the ByteDance chief executive.

Cui Fan, an adviser to the Chinese government, told state-run Xinhua news agency that ByteDance should “seriously and cautiously” decide whether to suspend its sale talks as a result of the new rules.

Erich Andersen, ByteDance general counsel, said: “We are studying the new regulations that were released Friday. As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the US and China.”

Microsoft, Oracle and Walmart have all shown interest in buying TikTok. Oracle and Microsoft declined to comment on the developments, while Walmart did not immediately respond to requests for comment.

The trade restrictions are the latest development in a feud between China and the US over TikTok, the popular video app that President Donald Trump has vowed to shut down unless its business in the country is sold to an American entity.

Prof Cui, who is also a professor at Beijing’s University of International Business and Economics, told the FT the changes to China’s technology export rules had been under discussion since 2018. But China was introducing them now in part because of the “current international situation”.

The scrutiny of TikTok follows a wider deterioration in relations between China and the US, with tensions over trade escalating this year following the coronavirus outbreak and over a new security law in Hong Kong that prompted US sanctions on individuals.

Recent US pressure has focused on the technology sector. Mr Trump, who has hardened his stance towards China ahead of US elections in November, has said there is “credible evidence” that actions taken by ByteDance might harm US security.

Earlier in August, Mr Trump said he was giving US companies 45 days to stop dealing with WeChat, a Chinese messaging app owned by Tencent. The US president has signalled he might take a similar approach towards other Chinese companies, including ecommerce group Alibaba.

In China, ByteDance has faced a backlash over the perception that it was bowing to US pressure.

Last week, Kevin Mayer, the chief executive of TikTok, quit his role, pointing to a “sharply changed” political environment. Earlier in the week, the company sued the Trump administration.

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