Chinese short video app, TikTok, is at the hub of a number of controversies including suspicious data collection practices. The U.S. is threatening to ban TikTok if it does not sell its US business to an American company before September 15th. According to the U.S. President, the purchase of TikTok by an American company must be beneficial to the U.S. This means that the deal will include some sort of royalty payable to the American government. Until recently, it appeared that all is in place for an American company to take over the Chinese business.
Nevertheless, a new report out of China suggests that this deal will not be a smooth ride. The Chinese government has imposed new restrictions on the export of AI technologies, this includes TikTok. The new export control requires ByteDance to get approval from the Chinese government before selling TikTok’s U.S. business. Of course, with the latest development, your guess can be as good as mine – the Chinese government probably wants to block the TikTok sale to an American company.
There are speculations that the new Chinese law aims to stop the sale of TikTok’s alogrithms and not the entire business. However, analysts believes that if the sale of the business does not have an algorithm, it is meaningless.
According to an insider, “TikTok without an algorithm is like a luxury car with a cheap engine”. This is because a large part of TikTok’s value lies in its core algorithm. If the transaction cannot include algorithms that will completely change their vision of acquiring TikTok.
There are also reports that if the alogrithm does not is not part of the acquisition, there may be no deal. However, another option for the bidders is to buy TikTok without algorithms and then write new algorithms for it.
China may want to block the TikTok sale
According to a recent official US statement, it doesn’t matter if Microsoft or other secure US companies acquire TikTok. Unless Microsoft or other American companies can purchase TikTok and conclude a deal, TikTok will be forced to close its US business on September 15th. In addition, as part of the deal, (the buying company) should quickly pay “large amounts of money” to the federal government.
China is well aware of the September 15th dateline before it imposed its new restriction. Most likely, the Chinese government does not want the deal to pull through. he new restriction from China will further slow down the discussions for a potential deal. In fact, there are speculations that China may delay the transaction until after the U.S. presidential elections in November.