US ban on TikTok: Potential retaliation from China

Beijing must choose how best to respond to an assault on the most valuable start-up in the world, TikTok, now that President Joe Biden has approved a bill that might force the company out of the US market.
The law that was enacted on Wednesday would enable ByteDance Ltd., the parent company of China, to sell up its shares in the video-sharing site before it is completely banned.

The foreign ministry of China pointed reporters to a commitment made by trade officials last month to take “measures to resolutely safeguard its legitimate rights and interests” at a daily briefing hours earlier.
In the midst of a hawkish election season, the administration of President Xi Jinping has so far responded to a wave of US trade restrictions with moderation. Biden’s selection of mostly symbolic measures, including taxes on commodities that China exports in small quantities to the United States, has made the Communist Party’s moderation easier.

Moving TikTok—or its Chinese owner—out of the US may call into question that assessment, opening the door for reprisal against US companies that have significant exposure to the Chinese market, such as Apple Inc. and Tesla Inc. In response to a US push to restrict Beijing’s access to cutting-edge semiconductors, officials last year showed their readiness to reciprocate by opening an investigation into American memory chipmaker Micron Technology Inc.
“At this point, China is keeping its options open,” Xiaomeng Lu, head of Eurasia Group’s geotechnology practice, said. However, she warned that “some US tech brands could be at risk of becoming the collateral damage of this tit-for-tat cycle” if TikTok runs out of legal alternatives and is forced to leave the country.
The majority of American social media companies, like Meta Platforms Inc. and Snap Inc., have already been pushed out of the Chinese market by Beijing’s internet regulations, which has reduced the pool of possible targets for a tit-for-tat reaction. A Chinese government grappling with a property problem that is impeding development and low domestic demand would probably want to avoid hurting its own economy with whatever action it takes.
Trade tensions are rising as Secretary of State Antony Blinken visits China this week to raise American worries about Chinese businesses supporting Russia’s military apparatus. In an attempt to harm US collaboration with China in other geopolitical hotspots, including the Middle East and North Korea, the Biden administration has threatened Beijing with penalties on its banks if they support the Kremlin’s assault in Ukraine.
The optics would also need to be taken into account, given that foreign investment in China fell to a 30-year low in 2023. As authorities step up attempts to improve sentiment, Xi threw out the red carpet for executives in Beijing this year and visited San Francisco in November to court American CEOs.
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“Sanctions against US companies could make it more difficult for US businesses to operate there,” Wei Zongyou, an American security and foreign policy professor at Fudan University in Shanghai, said. “This indicates that there is little chance of imposing additional limitations and penalties on Chinese companies.”
However, China has other, less well-documented weapons at its disposal. One such weapon is limiting US access to the second-largest economy in the world, which has long been a source of contention between Beijing and Washington.
Apple’s sales in China are expected to be negatively impacted by the extraordinary ban that Chinese agencies and government-backed companies imposed last year on employees bringing iPhones and other foreign gadgets to work. Government facilities already impose limits on Tesla Inc.’s electric vehicles because of worries about the data that the cars’ cameras may be collecting.
Beijing may increase its semi-official bans on the use of American electronics, which may put pressure on firms like Microsoft Corp. and Intel Corp. Fearing they would lose access to US markets, some large corporations run powerful lobbying campaigns in the US and have been known to resist more extensive US sanctions.
After failing to get Chinese regulatory permission in time, Intel was forced to withdraw from its $5.4 billion acquisition of Tower Semiconductor Ltd. last year. Some in Washington saw this as a reaction to Biden’s broad chip limits.
Although Xi hopes to achieve tech independence in the long run, Li Mingjiang, an associate professor at Nanyang Technological University’s S. Rajaratnam School of International Studies, believes that alienating foreign companies in that field would only impede China’s progress. He said that China’s current goal is to lessen its technological decoupling from the US. “It will not be helpful to punish a US tech company for this purpose.”
China’s most probable immediate move will be to attempt to stop TikTok from being bought by an American company. Beijing may use the export restrictions it put in place in 2020 to target the content-regulation algorithms that are the foundation of the platform’s success worldwide. If this were to happen, ByteDance would be forced to leave the US market rather than accept a sale.
In the event that the measure is passed into law, the firm has said that it would file a lawsuit. In an attempt that may take years, the platform would then have to depend on the First Amendment defense, just as it has done to resist a state prohibition in Montana.
Another twist: if Biden’s opponent, Donald Trump, wins in November, the platform may end up receiving a reprieve. Trump attempted to outlaw the app while serving as president. The former US president expressed fear that TikTok’s competitor, Meta, might gain popularity if it were banned.
According to Zhu Feng, executive dean of Nanjing University’s School of International Studies, Beijing must wait to see how the US election turns out for the time being since the law affects both countries.
He went on, “It hurts not just China but also the 170 million American users of this app.”