South China Morning Post
In the end, US President Donald Trump blinked in the stand-off between the US and China over TikTok.Trump, who demanded an outright sale of TikTok’s US business over national security and data privacy concerns, took a step back on Saturday after China issued updated export rules and as concerns mounted over a backlash ahead of the November presidential election, according to analysts. Separately, his attempt to ban Tencent Holding’s WeChat was put on hold by a judge.The new export controls, which cover two key technologies used by the short video app, meant an outright sale to a US firm was off the table, said Wang Yong, a professor at the Peking University School of International Studies. Another factor was Trump’s desire to win support among US tech firms ahead of the election, he added.Get the latest insights and analysis from our Global Impact newsletter on the big stories originating in China.The compromise was a big win for Silicon Valley-based Oracle, which has close ties to the Trump Administration. On Saturday, Trump said he approved “in concept” a new deal that would allow TikTok to continue operating in the US.TikTok confirmed that Oracle and Walmart will be eligible to purchase “up to a 20 per cent cumulative stake” in the pre-IPO financing round of TikTok Global, a new company that will run its non-China business. The two companies would pay US$12 billion for their stake, if they agree to the US$60 billion valuation sought by TikTok’s parent Bytedance, Bloomberg reported, citing a person familiar with the matter.“We are pleased that the proposal by Tiktok, Oracle, and Walmart will resolve the security concerns of the US administration and settle the question around TikTok’s future in the US,” TikTok said in a statement. An Oracle-ByteDance deal for TikTok gives Huawei a glimmer of hopeOracle said it would take a 12.5 per cent stake in TikTok Global and run the app on the Oracle Cloud. “We are a hundred per cent confident in our ability to deliver a highly secure environment to TikTok and ensure data privacy to TikTok‘s American users, and users throughout the world,” said Oracle CEO Safra Catz.Walmart said it has tentatively agreed to purchase a 7.5 per cent of TikTok Global as well as “enter into commercial agreements to provide our e-commerce, fulfilment, payments and other omnichannel services” to the company. Walmart CEO Doug McMillon will also serve as one of five board members of the new TikTok company.US Commerce Secretary Wilbur Ross said on Saturday that, at the direction of President Trump, his department has extended the deadline for “prohibition of identified transactions” on the TikTok mobile app until September 27 due to “recent positive developments”.That overrode an order issued Friday by the commerce department that would have banned downloads of TikTok from US app stores effective Sunday, under challenge in US courts. Those legal actions are now moot.“TikTok paid a price to keep its US business. I think it’s the best result for them … to some extent a ‘win-win’ for both sides,” said Wang. China blasts US ban as WeChat users prepare for workaroundsZhang Dingding, a Beijing-based independent internet industry commentator, said the ByteDance deal could even become a blueprint for how TikTok operates in other countries.Although Trump issued two executive orders to potentially ban TikTok if a divestment was not made, the tacit approval of the Oracle-Walmart deal could override the earlier orders, according to a lawyer.“If the administration approves whatever plan is ultimately in place, it most likely wouldn’t complicate things by going back and trying to enforce the harsher aspects of the [executive] orders,” said Nathaniel Rushforth, a US-qualified lawyer and cybersecurity specialist at Shanghai-based DaWo Law Firm.TikTok Global is likely to be headquartered in Texas and plans to hire at least 25,000 people, Trump told reporters at the White House on Saturday, adding that the deal would include a US$5 billion US education fund. “That’s their contribution I’ve been asking for,” he said.ByteDance said in a statement on Sunday that it first heard about the US$5 billion education fund from media reports.Friday’s order also included restrictions on US users of Tencent’s WeChat messaging app. That order was put on hold after magistrate Judge Laurel Beeler in San Francisco granted a preliminary injunction to the Trump administration’s WeChat curbs. The injunction was sought by the US WeChat Users Alliance, a non-profit organisation formed by lawyers who want to preserve access to WeChat for users in the US, arguing that that a US ban on the app would be like “losing a limb” for them.WeChat “serves as a virtual public square for the Chinese-speaking and Chinese-American community in the United States and is (as a practical matter) their only means of communication,” the judge wrote in the ruling, dated Saturday and released early Sunday, US West Coast time. Effectively banning it “forecloses meaningful access to communication in their community and thereby operates as a prior restraint on their right to free speech,” according to the statement.However, the stakes for WeChat are lower as its US user base is much smaller than TikToks, and its parent Tencent has a bigger interest in US gaming, according to Dev Lewis, a fellow at the Hong Kong-based think tank Digital Asia HubiPhone user Wendy Liu, who lives in Buffalo, New York state, said many overseas Chinese are looking at other options to stay in contact with family in China if the WeChat ban is expanded to include its communication functions. Money transfers via WeChat – one of its most popular functions – were prohibited within the US by Friday’s US commerce department order.“Many people have downloaded Line as their backup,” Liu said, adding that another workaround would be to use the Canadian app store for downloads.Rushforth, the Shanghai-based lawyer, said the main lesson for Chinese companies operating overseas is that they should anticipate closer scrutiny in the near to midterm.“This risk calculation should be made without regard to the upcoming election, as neither candidate is likely to significantly change course when it comes to overall trade and geopolitical considerations,” he said.Even with Trump’s tacit approval, there are risks for TikTok given the president’s tendency to change his mind, especially when criticised by conservatives for looking weak on China. “The biggest uncertainty is President Trump. It is possible that he will be criticised by Congress and conservatives members in the party,” said Peking University’s Wang, although he believes the level of uncertainty is diminishing.More from South China Morning Post: * Donald Trump says he approves Oracle’s deal with TikTok in principle * TikTok, WeChat bans starting Sunday will be limited in scope * TikTok files suit in US court to halt download ban in opposition to Donald Trump’s demands, as does WeChatThis article Trump steps back from the brink as he approves TikTok’s sale, while WeChat wins an 11th hour reprieve from outright curbs first appeared on South China Morning PostFor the latest news from the South China Morning Post download our mobile app. Copyright 2020.