TikTok woes suggest the U.S./China relationship needs work

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TikTok

The cautionary tale of TikTok illustrates just where we are in a global economy wracked by conflict, uncertainty and chaos.

 

An array of planners continues to work on how to thread the needle on the social media platform TikTok, developed as part of a Chinese entity, which the American president has condemned as a national security risk. This morning, Reuters floats rumors that Microsoft is due to take over the company, which is estimated at $50 billion in value.

 

The logic goes that by putting TikTok under an American banner, the involved parties will fend off federal efforts to ban the platform in the U.S.

 

However, massive activity on Chinese social media is just one indicator that the Chinese as a whole aren’t keen to give up ownership of this popular social medium, and in light of China’s growing international clout, this could be an issue.

 

In some ways, the whole thing started when the American White House initiated a capricious set of tariffs against China. China retaliated, and we had months of market volatility based on that trade uncertainty.

 

Then came the coronavirus, which was tanking the American stock market until legislators put together a $3 trillion aid package, and then additional spending that stabilized equities somewhat, but added enormous amounts to the US debt with the Federal Reserve printing money at will.

 

Now, those looking US/China trade relations are suggesting that the work on TikTok’s likely future is a pretty unusual type of deal.

 

Reuters quoting of an involved Chinese official note comments that the proposal is “not a standard M&A” situation, which is putting it mildly.

 

News from ByteDance, the Chinese company that currently owns TikTok, also underlines the sensitivity of the deal.

 

“In an internal letter to staff on Monday seen by Reuters, the (ByteDance) company’s founder and CEO Zhang Yiming said the firm had started talks with a tech company it did not identify to clear the way ‘for us to continue offering the TikTok app in the U.S.,’” write Yingzhi Yang and Kane Wu. “Zhang’s letter to staff also said ByteDance did not agree with the stance taken by the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for national security risks, that it must fully divest TikTok’s U.S. operations. ‘We disagree with this CFIUS conclusion,’ the letter said but added: ‘…we understand the decision in the current macro environment.’”

 

Will American parties be able to put TikTok under new management? Will that satisfy the American White House? The whole thing looks more and more like a soap opera every week…stay tuned.

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