by Chinese officials decried the lack of “fairness” in the US last week after the swift passage of a House bill that called for the Chinese company ByteDance to divest its popular social media app TikTok.
China’s foreign ministry spokesman accused the United States of using national security as a pretense to “deliberately suppress other countries’ top companies,” strongly suggesting that the Chinese government block any forced sale of its largest social media app. popular.
But aside from preventing a spin-off, China’s options for potential retaliation against the US remain limited, given the country’s current economic position and its own censorship policy, experts say.
“The biggest thing they take is retaliatory measures, which really cuts into that decoupling agenda that some of them have in Washington,” said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. “[That] it would encourage businesses to pull out of China because they wouldn’t feel safe there.”
China weighs its options with TikTok
The latest congressional action marks another twist in a year-long effort to limit the scale and influence of a social media app that has grown to more than 170 million users in the US.
Since its launch in 2017 as the international version of parent company ByteDance’s popular Chinese app Douyin, TikTok has become one of the most downloaded apps worldwide, along with Meta’s (META) Instagram.
But the vast amount of data collected on the platform, as well as concerns about the Chinese Communist Party’s ability to take control of ByteDance, have raised alarms for US lawyers who consider TikTok’s ties to China a security risk. national.
In Congressional testimony, TikTok CEO Shou Zi Chew insisted that the company stores Americans’ data in Virginia and Singapore, not China. However, the company later admitted that there are some exceptions to creator data, as reported by Forbes.
“The Chinese government has broad legal authorities to compel corporations in matters of national security,” said Colin Costello, CFIUS and national security consultant at law firm Freshfields. “So from the perspective of someone who views the Chinese government as a nuisance and a very capable aggressor, the question is not whether it was used, but can it be used? And the answer to that is, … from the point of view of the people who wrote this bill, yes.”
This is not the first time Beijing has responded to threats to ban TikTok from the US.
In 2020, after former President Donald Trump signed an executive order effectively banning TikTok and WeChat in the United States, ByteDance immediately moved to update its export control rules. The changes restricted the export of “technology based on data analysis for personalized information recommendation service.”
Reva Goujon, a director at Rhodium Group, expects Beijing to intervene similarly if the Senate approves the House bill and if President Joe Biden signs it into law to “show its own resistance against the US.”
But China’s own economic reality and a broad slowdown in foreign investments could affect Beijing’s calculation of the scale of its response. Foreign direct investments in China fell to a 30-year low in 2023, dampened in part by concerns about geopolitical tensions and an unpredictable business environment.
“Beijing must weigh the risk of further alienating foreign investors when China’s economic challenges are already on full display,” Goujon said. “Protective measures, whether on export controls, data security, or cyber security measures, will only drive companies deeper down the path of diversification.”
That hasn’t stopped Beijing from responding in the past. Many American social and online media, including Alphabet’s Google (GOOG), Meta’s Facebook, and Snapchat (SNAP), have already been banned from the world’s second-largest economy.
The government also banned critical domestic infrastructure operators from buying Micron ( MU ) products last year, after Washington imposed export controls on key American components and chip-making tools. Months later, China ordered employees at central government agencies to stop using Apple ( AAPL ) iPhones, citing national security concerns.
If passed in the Senate, the TikTok bill would set a six-month deadline for TikTok to divest from ByteDance, a challenging situation given the complexity of separating US assets from a global app.
Chorzempa said Beijing is unlikely to approve any deal, regardless of the price tag or corporate structure, in part because of what TikTok stands for: a global social media success story made in China.
“If Beijing is looking at a ban on the US market versus losing global control [over an app]it is not clear to me that he would prefer a divestment and a payout to the existing shareholders compared to the loss of that channel,” said Chorzempa.
In part, he said, that’s because it’s clear from “the plethora of Chinese actions in recent years that the interests of shareholders and the financial interests of shareholders are not very high on the Chinese government’s list of priorities.”
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