TikTok Deal Is Complicated by New Rules From China Over Tech Exports

In Friday’s update to the export control rules, China’s Commerce Ministry and its Science and Technology Ministry restricted the export of “technology based on data analysis for personalized information recommendation services.” TikTok plays up its ability to use technology to understand users’ interests and fill their feeds with more of what they will enjoy watching.

In the Saturday article published by Xinhua, a professor of international trade at China’s University of International Business and Economics, Cui Fan, said that ByteDance’s technologies would most likely be covered by the new export controls.

“If ByteDance plans to export relevant technologies, it should go through the licensing procedures,” the article cited Mr. Cui as saying. Any sale of TikTok would most likely require the transfer overseas of code and technical services, the article said.

“It is recommended that ByteDance seriously study the adjusted catalog, and carefully consider whether it is necessary to suspend the substantive negotiation of related transactions, perform the legal declaration procedures and then take further actions as appropriate,” Mr. Cui was quoted as saying.

Mr. Kennedy said that it was exceedingly rare for a professor to make comments about a specific, in-progress deal, and that it signaled that ByteDance would now have to consult the Chinese authorities about the controls.

China has previously used bureaucratic procedure to block commercial deals without appearing to do so outright. In 2018, Qualcomm called off a $44 billion deal to buy the Dutch chip maker NXP Semiconductors after Chinese regulators simply failed to either approve or reject the transaction. Beijing’s prolonged antitrust review was seen as a form of leverage over trade talks with the Trump administration, though China’s Ministry of Commerce denied that the two matters were related.

In other industries, too, foreign companies including Microsoft, Volkswagen and Chrysler have been investigated for what China says are anticompetitive practices. Beijing has rejected the charge, made by American business groups, that it uses laws like antimonopoly rules to advance industrial policy.

Article source: https://www.nytimes.com/2020/08/29/technology/china-tiktok-export-controls.html