CvT: Sept. 16, 2020

Stay in the know on US-China relations

Dancing a Byte Over the Line for TikTok

Written by: Grace Spoerner

Tensions between the US and China have reached a boiling point as the threat of a TikTok ban looms in the near future. The owner of TikTok, Bytedance, is now obligated to select an American company to acquire TikTok if they want to continue business in the United States.

Those unfamiliar with TikTok may only view the platform as another standard social media app for the younger generation. However, TikTok currently holds a valuation of US$50 billion and has an estimated 80 million users within the United States alone. Labeling TikTok as another social media app fails to acknowledge the broader economic implications of the platform and the political impact its forced acquisition holds within the United States.  

Trump & Xi trade blows

President Trump announced his decision to ban TikTok’s parent company, ByteDance, in the United States through an executive order on August 6, citing national security concerns. If the executive order comes to fruition, it would effectively cease involvement of TikTok from the United States’ marketplace. As the confrontation between ByteDance and the United States continues, experts argue that the ban on other Chinese tech conglomerates like Huawei and Tencent is not solely about national security, but also a reflection of the power struggle between the two nations. Cited as a “geopolitical dogfight,” the acquisition of TikTok has the potential to alter the landscape of big tech between the two countries. 

In a major pushback against the Trump administration, the Chinese government filed a lawsuit in federal court claiming President Trump’s executive order prohibits Bytedance from “due process protections of the Fifth Amendment.” Beijing also added TikTok’s technology to a list of products “critical to national security,” making it illegal for ByteDance to sell its technology and algorithm to any foreign buyer without prior government approval. Acknowledging its position as the center of a diplomatic feud, ByteDance immediately agreed to the Chinese government’s terms, giving China the ultimate say in whether or not to sell its technology to the US. With TikTok given until September 20 to accept a deal, several big names like Microsoft, Oracle, and Walmart have been thrown into the mix. Ultimately, Oracle was announced as the winner to acquire TikTok. This agreement between Bytedance and Oracle now leaves China with the difficult decision to yield or bear the cost of TikTok’s billion-dollar price tag.

Bottom line

While the fate of TikTok remains undecided, the Trump administration continues to add other Chinese tech conglomerates to its technology “blacklist.” Next on the list may be the Semiconductor Manufacturing International Corporation (SMIC), the Shanghai-based chip giant. Rumors swirling around Washington quickly sent SMIC’s shares plunging 23% Monday morning. A spokesperson for China’s Foreign Ministry decried the threat as an act of “blatant hegemony” and accused the US of “breaking international trade laws.”

These actions have experts wondering whether this strategy is part of Trump’s reelection campaign or, perhaps, that the Trump administration is attempting to establish a hardline against China. As diplomatic tensions between the US and China continue to escalate, it is unclear whether the two countries can reach a truce, or if the power struggle over the tech industry sets precedent for broader bilateral relations.

The Big RIP in the Cyber Realm

Written by: Archit Oswal

Hardly 20 years have passed since President Clinton likened China’s efforts to censor online content as “trying to nail Jell-O to a wall.” Clinton’s ill-fated words have since been confined to the dustbin of history, and the initial Western consensus that the internet would spell the end for authoritarian governments’ censorship has fallen apart in a spectacular fashion. Under the current administration, the US, once the foremost champion of a single, global internet, has embraced the internet’s inevitable bifurcation into two parts, one led by the US and the other by China. In order to get ahead of the curve, the US has subjected several Chinese technology companies to legal action and ramped up pressure on its allies to divest from Chinese internet and telecommunication technologies.

The Clean Network Initiative & Cyber Sovereignty: two sides of the same coin

Escalating tensions culminated in July with the Trump administration’s announcement of the Clean Network initiative, which aims to eliminate “untrustworthy” Chinese technology companies from global internet and telecommunications infrastructure. Earlier this month, Beijing responded with its own vision for data security in the 21st century, the “Global Initiative on Data Security.” The Chinese proposal downplays accusations that the global operations of China’s technology companies are beholden to Beijing and includes provisions that formalize China’s support of cyber sovereignty. 

Both Russia and China are pushing for cyber sovereignty, the notion that governments have the right to exercise control over the internet within its borders. If they succeed, this would legitimize China’s “Great Firewall” by normalizing localized control of data, surveillance, and censorship.

China’s proposal also attempts to wrest control of the data security narrative away from the Trump administration by indirectly accusing the US of “making groundless accusations against others in the name of  a ‘clean’ network and [using] security as a pretext to prey on enterprises of other countries who have a competitive edge.” By claiming America’s unilateral approach to data security, the proposal reframes the narrative on data security around recurring themes in Chinese foreign policy like “common development” and “mutual respect.”

Looking forward

Although rejected by the US, the Chinese narrative on data security may find a more receptive audience in Europe where American unilateralism has disgruntled steadfast champions of multilateralism. Close American allies have repeatedly resisted calls to ban Chinese companies outright from taking part in the construction of telecommunications infrastructure – the UK only banned Huawei after the US crippled the company’s semiconductor supply chain. Germany and France, for their part, have made clear that they will rely on their own analysis to regulate foreign companies.

Worryingly for the US, Europe’s resistance to the “Clean Network” may create an opportunity for China’s narrative to strike a chord in the global audience. If persuasion alone cannot convince the world to steer clear of Chinese tech, expect Washington to adopt a more assertive approach in order to seal off Chinese companies from as much of the world as possible.

The Himalayan Shots Heard ‘Round the World

Written by: Zoe Roth

Similar to that of the US-China relationship, the China-India relationship has been characterized by escalating conflict throughout 2020. The source of the friction: the two nations’ eagerness to expand infrastructure along an ill-defined 2,100 mile-long shared border in the Ladakh region of the Himalayas.

China and India have always shared a border, with violence dating back over 60 years over land claims. Deaths in a 1975 skirmish eventually led to a 1996 agreement between the two nations prohibiting the use of guns and explosives near the border. However, once India began constructing a high-altitude air base in the region, violence from the Chinese side led to the deaths of 20 Indian and an unreleased amount of Chinese soldiers earlier this year.

China and India are the world’s most populous countries, with 1.38 billion and 1.31 billion citizens each, respectively. Besides being extremely populated countries, both sides are also militarily strong and nuclear-equipped. Many experts fear that without de-escalation from either side, this border dispute could quickly heighten into a more dangerous conflict.

Beyond military escalation, the fallout has extended into the economic sphere between the two countries as well. Nationwide protests in India have aimed to “Boycott Made in China” as the nation attempts to address its US$58 billion dollar deficit with China. Apart from economic measures, citing similar security concerns as the US, India has blocked over 150 Chinese apps, including TikTok. 

This story is developing and both sides have recently taken steps toward repairing diplomatic ties, with top leaders from both nations declaring their common goal of reaching a peaceful solution. Top government officials from both sides will meet in Moscow in hopes of reaching an agreement. Until then, both sides have built arsenals and established strict “red-lines” on their respective sides. The question remains, ‘if this conflict worsens, will the US play a diplomatic middle-man role, or will it back up the world’s largest democracy?’

Further Reading

Coffee vs Tea

CvT: Oct. 28, 2020

Coffee vs Tea

CvT: Oct. 21, 2020

Coffee vs Tea

CvT: Oct. 14, 2020

Scroll to Top

The Weekly Steep Newsletter

Arm yourself with bite-sized insights to stay in the know on all China business news. Leave your translator at home – our free weekly newsletter will keep you current on local news updates and top industry developments in the time it takes to drink a cup of tea!