Banning TikTok would hit China’s tech ambitions and deepen the global digital divide

Analysis by Laura He, CNN

Hong Kong (CNN) — TikTok is facing an existential crisis in America. If its Chinese owner fails to sell the app in the next year or so, it could be banned in its biggest market.

Not only would that deal another huge blow to China’s tech ambitions, it would further deepen the divide between two digital worlds centered around the rival economic superpowers.

Congress on Tuesday approved legislation that could compel ByteDance to sell TikTok or face a national ban. President Joe Biden is expected to sign the bill into law on Wednesday; TikTok has already said it will challenge the law in court.

Beijing has previously said it strongly opposes a forced sale of TikTok, and it has revised its export control rules to give it the power to block a sale on national security grounds. That leaves few options for ByteDance to secure the future of TikTok in the US, its biggest market with 170 million users.

“A forced sale of TikTok in the US amounts to a downgrade of the app, as the Chinese government won’t approve the sale of its algorithms,” said Alex Capri, a research fellow at the Hinrich Foundation and a lecturer at the National University of Singapore’s Business School.

“If TikTok is forced to stop operating in the US, ByteDance’s prospects in other mostly liberal democracies will come under further scrutiny,” he said.

If the Chinese government won’t let ByteDance relinquish TikTok’s algorithm, it could block the sale outright. Alternatively, it may allow TikTok to be sold without the lucrative algorithm that forms the basis for its popularity.

A US ban, or a less powerful version of TikTok, would be a windfall

for YouTube, Google, Instagram and other TikTok competitors, as many of its customers may jump ship, Capri said. And it would be a major hit to the global ambitions of ByteDance.

“It [a TikTok ban] would be the end of ByteDance’s global expansion, as it would be a sign that the Chinese state values the algorithm’s security more than ByteDance’s financial prosperity and global expansion,” said Richard Windsor, tech industry analyst and founder of Radio Free Mobile, a research company based in the US.

“The implications are that the ideological struggle being fought in the technology industry will become more intense.”

A ban on TikTok is also likely to accelerate a shift that is splitting the world’s tech landscape into two blocs, one centered on the US, the other embracing tech from China, according to Capri.

“The move against TikTok in the US is another step towards not only a bifurcated platform economy between Chinese apps and Western apps, but also, more broadly, the bifurcation of entire the global tech landscape,” he said.

“This includes everything from who owns and operates data centers, to space-based internet satellites, to undersea cables and, of course semiconductors.”

In that sense, the TikTok ban has its silver lining for Beijing.

“A ban in the US will spark renewed efforts to spread China’s digital footprint in Southeast Asia, and other mostly developing markets world wide,” Capri said.

Growing challenges for Chinese apps

The TikTok legislation was included in a wide-ranging foreign aid package meant to support Israel, Ukraine and Taiwan.

Once President Biden signs it into law, ByteDance will have up to a year to complete the sale or face an effective ban for the platform.

US officials and legislators have long expressed concerns about TikTok’s potential national security risks, including that it could share data with the Chinese government, or manipulate content displayed on the platform. But TikTok has rejected the claims.

“The new divestiture bill is the result of a concerted lobbying effort by Silicon Valley venture capitalists associated with US technology companies that stand to benefit from the China threat narrative proponents of the bill have been pushing, ” said Paul Triolo, partner for China and Technology Policy Lead at Albright Stonebridge Group.

In general, Chinese companies and apps operating the US are facing growing challenges, he said.

Biden administration officials are beefing up a new office at the Commerce Department to enforce provisions of a Trump-era rule on protecting US information technology supply chains that covers connected apps and could be used to push for further restrictions.

“It seems unlikely that Congress would single out another Chinese company like TikTok for a specific bill, but the Commerce IT supply chain rule could be used in the future to limit the ability of Chinese companies and apps to have access to portions of the US market,” Triolo said.

Will there be retaliation from Beijing?

China’s Commerce Ministry has pledged to take all “necessary measures” to protect its interests, shortly after the House of Representatives passed an earlier version of the TikTok bill last month. But it didn’t elaborate.

On Wednesday, Wang Wenbin, a spokesperson for the Foreign Ministry said in response to a question from CNN’s Marc Stewart: “On the TikTok matter, we have stated our position clearly, and I have nothing to add today.”

Most American social networking apps have already been barred in China. Beijing currently blocks most US social media platforms — including Google, YouTube, X, Instagram, WhatsApp and Facebook — because they refuse to follow the Chinese government’s rules on data collection and the type of content shared.

Triolo doesn’t expect Beijing to react “strongly” to the US ban on TikTok, though.

“While Beijing is already on record as opposing any forced divestiture of TikTok US from Bytedance, its primary concern would be the transfer of technology involved,” he said. “In general, Beijing cares much less about a social media company than about US technology controls.”

“Beijing will be much more likely to retaliate strongly to new US export controls, and is not likely to respond in kind to the US effort to ban Tiktok US if it eventually happens,” he added.

Beijing recently ordered Apple (AAPL) to remove social messaging apps WhatsApp, Signal, and Telegram from the firm’s China app store. But it has not followed up with major crackdowns on virtual private networks, which many tech savvy Chinese use to communicate with friends abroad via these messaging apps.

“The move was likely timed to show that China will continue to block access to some apps it considers to be a national security threat, though the blocked apps have far fewer users in China than the 170 million or so users of TikTok in the US,” Triolo said.

— CNN’s Wayne Chang and Marc Stewart contributed reporting.

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