The U.S. government is reviewing the forced sale of TikTok to a group that includes Oracle (NYSE: ORCL) and Walmart (NYSE: WMT), putting an apparent end to ex-President Trump’s final, failed bid to squelch Chinese competition.
Citing national security grounds, Trump had first tried to ban the popular short-form video app from China outright, then settled for a forced sale to put it into American corporate hands. With a federal district court ruling against the move, the Trump administration appealed. Now, the Biden Justice Department has filed for a delay in the appeal pending a review of the case, the Wall Street Journal reported Wednesday.
This should be a death knell for the type of rogue capitalism that Trump was practicing throughout his presidency when it comes to China. When he didn’t like the competition from a Chinese company, he would do one of three things: impose tariffs, forbid U.S. firms from doing business with it, or try to ban it outright. Examples are legion, from his shutting off exports to ZTE (HKEX: 0763) and Huawei to his ban on popular apps like Tencent’s (HKEX: 00700; OTC: TCEHY) WeChat. In every case, the Trump administration cited national security, claiming the Chinese Communist Party was hoarding data from its technology companies for nefarious purposes.
TikTok’s parent company, ByteDance, denies sharing any data with the government, and Tencent says it adheres to the highest standards for user privacy and security of data for its WeChat app. It is, however, known for censoring conversations on WeChat.
Now Biden also is reportedly backing away from Trump’s ban on WeChat, which is the go-to, all-inclusive app in China used by more than a billion people. A few million Americans, mostly of Chinese extraction, say it is by far the easiest way to keep in touch with friends and family back home. Biden has ordered the Commerce Department to review the TikTok, WeChat and other moves by the previous administration to make sure they really do comport with national security considerations.
“We plan to develop a comprehensive approach to securing U.S. data that addresses the full range of threats we face,” Emily Horne, a National Security Council spokeswoman, told the Wall Street Journal. “This includes the risk posed by Chinese apps and other software that operate in the U.S. In the coming months, we expect to review specific cases in light of a comprehensive understanding of the risks we face.”
It’s not that there are zero considerations when it comes to Chinese equipment. But the reality with technology is that data gets shared – widely – and that includes across borders. There is no denying it and no stopping it, and the best solution is to deal with it through security safeguards and international agreements. Cybersecurity professionals are in high demand these days, both in government and private industry.
Wednesday night, Presidents Biden and Xi Jinping talked on the phone for the first time since Biden occupied the White House. The two know each other fairly well from the days of the Obama administration, and they exchanged greetings on the eve of the Lunar New Year – China’s biggest holiday, which began Thursday.
Reports from both sides indicated a fairly robust and candid discussion about the issues that divide but also can help unite the two most powerful countries in the world. Biden made clear that he won’t be as easy as Trump on some very sensitive issues for China that include the treatment of Taiwan and Hong Kong and the human rights situation in Xinjiang, a large, western province where the Muslim majority ethnic Uighur population is targeted.
He also told Xi that his administration will continue the push for a level playing field when it comes to trade and investment, but that he will be fair. We don’t know for sure, but it’s likely that he also told Xi his administration is taking a fresh look at the tech relationship.
Going forward, that is the most important aspect of the U.S.-Sino economic relationship, because the race is on in key global industries such as artificial intelligence, 5G and industrial robots. Economists agree that whoever leads in these industries, particularly AI, likely will assume global economic leadership.
The way that China and the U.S. should engage one another is through a healthy mix of competition and cooperation. This week singaled a good start, thanks to the new occupant in the White House.