ByteDance founder’s diplomatic two-step

ByteDance founder Zhang Yiming’s relationship with Beijing could make or break the company. (Getty Images)
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Updated 06 September 2020

ByteDance founder’s diplomatic two-step

  • TikTok owner keen to avoid ‘political football’ in growing US-China hostilities

BEIJING: ByteDance founder Zhang Yiming has long positioned himself as a global internet entrepreneur, largely eschewing Chinese government involvement, but US demands to sell his crown jewel TikTok are testing the boundaries with Beijing.

A year ago, ByteDance was approached by the Chinese government with offers of help when TikTok, a short-video app with a huge following among young people globally, faced political heat in India, a source familiar with the situation told Reuters. But the company sent only mid-level staff to meet with government officials, signalling that the company wanted to go it alone.

The 38-year-old Zhang, who has trodden a different path to other high-profile Chinese tech tycoons, shifted tack in August when US President Donald Trump threatened to ban TikTok in the US unless it was sold to a US firm.

Zhang’s team sought a meeting on his behalf with China’s ambassador in Washington, Cui Tiankai, two sources familiar with the matter said.

While Zhang was only hoping for an informal chat with Cui to seek advice, his approach was seen as a turning point, government and industry sources told Reuters.

The embassy directed the ByteDance team to the Foreign Ministry in Beijing. Although no further talks took place, and Cui and Zhang did not speak, the Chinese government interpreted the approach as a signal that ByteDance was open to assistance.

China entered the fray on Aug. 28, by revising a tech export control list that experts said would give them regulatory oversight over any TikTok deal. Reuters could not determine if Beijing’s interpretation of Zhang’s approach and the Chinese government move were linked.

One of the sources said that by standing up for ByteDance, Beijing wanted to demonstrate to private companies caught in the crossfire of China-US strategic competition that the country is firmly behind them.

“We want to show all other countries that this is what the Chinese government will do if you bully any of our companies, so don’t follow what the US is doing,” the source said.

The diplomatic dance taking place around TikTok follows years of acrimony between Washington and Beijing over the role of China’s Huawei Technologies, which the US has alleged is effectively a Trojan horse for Chinese espionage.

Huawei and Beijing have repeatedly denied any such activity.

Asked about its engagement with ByteDance, a Chinese Foreign Ministry spokesman said he was not aware of the specifics of the situation, adding that the US was over-generalising the concept of national security and abusing its power.

“Not only does it go against market principles and international rules, it is a mockery to the principles of market economy and fair competition that the US prides itself on,” he added.

A senior US administration official said China had blocked US tech companies such as Facebook and Twitter for years and the US actions were designed to protect the private information of its citizens.

“We’re just very concerned that, essentially, anything that could be done on that platform would be subject to the Chinese Communist Party’s algorithmic attempts to control human behavior worldwide.”

The Chinese Embassy in Washington did not immediately respond to a request for comment. ByteDance declined to comment.

TikTok has said it would not comply with any request to share user data with the Chinese authorities.

China had originally considered speeding up the launch of an “entity list” to punish foreign companies, groups and individuals deemed harmful to its interests, a government source with direct knowledge of the matter said.

But this was dropped as a countermeasure to the Trump administration’s move to ban transactions with ByteDance and Tencent’s WeChat because it would have escalated tensions and was replaced instead by the rules published last week.

Zhang did not know of the tech export rule revisions ahead of time, two sources told Reuters, and the company’s view is that it ultimately prefers to be free to make its own decisions, according to one of the sources. Others close to the TikTok sale talks say the move threw a spanner in the works of already-complicated negotiations and could scupper any deal.

China’s Commerce Ministry, which published revisions to the tech export control list, did not respond to a request for comment.

ByteDance is negotiating with a Microsoft-Walmart coalition, and a competing investor consortium led by software firm Oracle, on a sale of TikTok that could be worth as much as $30 billion.

ByteDance is still keen not to become a “political football” and prefers to use legal means rather than rely on government backing to resolve the issue, the source said. The company is suing to block one of Trump’s orders.

“I doubt having the government speak up for this company can do much in helping it gain market access into another country,” said Chu Yin, a Chinese scholar with the Center for China and Globalization, a Beijing-based think tank.

“ByteDance might fare better if it can share some interests with its competitors in the US,” he added.

Zhang has pursued a different path to Chinese Internet entrepreneurs such as Alibaba founder Jack Ma, who is a Communist Party member, and Tencent’s Pony Ma and Baidu’s founder and chief executive Robin Li, who are both members of the Chinese People’s Political Consultative Conference, a ceremonial advisory body.

Zhang, who is not a member of either, has focussed on global growth even as his counterparts have retrenched from overseas and opted to focus on domestic markets.

This year he appointed new heads for the China operations to personally take up more responsibility over ByteDance’s international business and also began moving key research capabilities and decision-making functions abroad. In March, he said in an open letter that he spent two-thirds of 2019 overseas.

He has personally sought advice from around ten people at US think tanks and former US government officials recently, a source familiar with the situation said.

Zhang has also taken numerous steps to assuage US concerns that TikTok could be endangering Americans by collecting personal data and censoring political content.

He hired former Disney exec Kevin Mayer as TikTok CEO, moved TikTok content moderation work outside China and established a “transparency center” in the US to give outsiders access to observe TikTok’s data security practices and policies.


‘The stock market, stupid’ — Trump’s claim is looking hollow 

Updated 29 October 2020

‘The stock market, stupid’ — Trump’s claim is looking hollow 

  • The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency
  • The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost

Before the US election of 1992, candidate Bill Clinton summed up what he saw as the reason he would become president: “It’s the economy, stupid.” He was proved right as voters disowned the economic policies of President George H.W. Bush in their droves to elect Clinton. 

Until the COVID-19 pandemic began to ravage the US economy in March, President Donald Trump would have been able to make the same claim. For the four years of his presidency, the US economy had continued the progress initiated by his predecessor to recover from the 2009 global financial crisis.

By most measures — growth, employment, inflation — the Trump years had been good, and those on the top of the pile had even more reason to be grateful thanks to the big tax cuts he had made a flagship policy.

The pandemic changed all that in the space of a few weeks as lockdown measures shocked the economy. Jobless claims soared to all-time records, bankruptcies and closures affected large swathes of American business, and gross domestic product collapsed. The International Monetary Fund forecasts that the American economy will shrink by 4.3 percent this year.

But Trump could still claim instead that “it’s the stock market, stupid” as a reason he could be re-elected. Mainly because of the trillions of dollars injected into the economy in the form of fiscal stimulus, US share indices had swum against the economic tide.

The S&P 500 index hit an all-time high in September, allowing Trump to boast that under his administration, investors and the millions of people whose livelihoods depended on the financial industry had never had it so good.

Now, it looks as though even that final claim is looking more fragile. For the past couple of days, US and European stock markets have gone into reverse as investors took fright at the rising number of COVID-19 cases and the re-imposition of economic lockdowns in many countries.

Trump might argue, with a little justification, that Wall Street is worried about the prospect of Joe Biden being elected president by the end of next week. Certainly the contender, by definition, is something of an unknown quantity in terms of economic policy.

He is also known to favor some policies — such as tighter regulation on environmental sectors, more spending on health care, and higher taxes for federal services and projects — that have traditionally been regarded as contrary to the philosophy of “free market” America.

In particular, the energy industry is worried about possible restrictions on shale oil and gas production that Biden and his “green” team are believed to favor. However, it should be pointed out that the Democratic candidate has specifically said he will not ban shale fracking, as some environmentalists want.

In any interesting side-story, the state of Texas — one of the biggest in terms of electoral college votes — would seem to have more to lose than any other if the energy scare stories about Biden were true. Yet the contest there between Democrats and Republicans is the closest it has been for decades, according to opinion polls.

The timing of the Wall Street downturn is the worst possible for the incumbent, who has declared every new peak in the S&P as a personal victory throughout his presidency and a sign of his deal-doing prowess. If even this claim is denied to him in the final week of campaigning, it would make the uphill battle against the polls even more difficult.

There is a chance that Big Tech might offer some relief. The likes of Apple, Amazon, Alphabet and Facebook are due to declare their earnings for the third quarter, and how those numbers are received could give the indices a boost, given that they were the ones largely responsible for the big market gains earlier in the year.

But for Trump, any such respite might be too little, too late. It looks as though Wall Street and Main Street are finally catching up in their gloom, and there is nothing the president can do about it.