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Restrictions by China Narrow Options for TikTok

 Already facing limited options amid pressure from the White House, any deal for the U.S. operations of TikTok may now encounter opposition from the Chinese government.

Chinese officials on Aug. 28 introduced new restrictions on technology exports that gives Beijing the power to veto the sale of TikTok’s algorithm to a U.S.-based company.The short-form video platform’s algorithm is considered a core value of the TikTok app.

Updated regulations prohibit exporting technology including text analysis, voice recognition and content suggestions without a license from the Chinese government.

According to a CNBC report, TikTok’s China-based parent company ByteDance Ltd. had settled on a buyer for the social media company’s U.S. operations — Oracle Corp. and a joint bid from Microsoft Corp. and Walmart Inc. were considered front-runners — before the new rules were instituted.

The Chinese restrictions have prompted ByteDance founder Zhang Yiming to reconsider his options since obtaining approval from officials in the U.S. and China could push the deal past the November presidential election, according to Bloomberg.

The app could face an effective ban in the U.S. on Nov. 12 under an executive order signed by President Donald Trump. He had initially ordered a ban on transactions between U.S. businesses and ByteDance as of Sept. 20 before extending the deadline.

Clayton Dube, director of the U.S.-China Institute at USC, said it’s too early to know whether Chinese policies will prevent the sale, “but it certainly further complicates a difficult situation for ByteDance and those who may wish to buy the local TikTok franchises.”

Reuters, citing anonymous sources, reported that ByteDance is weighing four options. The first is to sell TikTok without the algorithm it uses to make recommendations to users. The second is to negotiate an up to a year-long transition period with the U.S. The third is to seek approval from China to sell the algorithm to the chosen U.S. company. And the fourth is for the U.S. buyer to license TikTok’s algorithm from ByteDance.

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