China export restrictions pose new risk for TikTok sale in US

China export restrictions pose new risk for TikTok sale in US

China’s inclusion of new technologies on an export restrictions list could hamper TikTok’s sale in the US, according to state media reports, in the latest ratcheting up of trade tensions between the two countries.

China’s Ministry of Commerce revealed late on Friday the government had added items including those related to computing and artificial intelligence to a list of technologies subject to export controls.

In an interview with the state-run Xinhua news agency, Cui Fan, a government adviser, suggested that the new measures could impact the sale of TikTok by ByteDance, its Chinese owner, because they cover some of its underlying technologies.

He added that the company, which has attracted interest from Microsoft, Oracle and Walmart for its operations in the US, Canada, Australia and New Zealand, should “seriously and cautiously” decide whether to suspend its negotiations as a result.

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

China has not adjusted its list of technology export restrictions since 2008, the Ministry of Commerce said in a statement. The changes were needed because of the “rapid development” of science and technology in the country.

The updated list of controlled exports added restrictions for “personalized information recommendation services based on data analysis”. Tiktok’s app is built on algorithms that analyse user behaviour to push personalised content.

The commerce ministry said it approves or denies applications for export within 30 business days of receiving an application.

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.”

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

Inclusion on the list means companies must obtain additional government approvals for the export of certain technologies. Prof Cui told Xinhua that ByteDance should go through the “licensing procedures” if it is exporting related technology. 

The scrutiny of TikTok follows a wider deterioration in relations between China and the US, with longstanding tensions over trade escalating this year following the coronavirus outbreak and the introduction of 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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