The real question will be, who blinks first; the US or China?
For Donald Trump, the Tik Tok issue is one of the biggest manifestations of his battle against China. This assumes extra significance ahead of the US elections. What is this really about, and where does Tik Tok go from here?
Curbs on Tik Tok in the US
The first curbs on Chinese apps in the US have already started and Tik Tok may be next in the line. The US wants China to give up ownership of Tik Tok US on security grounds. Obviously, that is asking for too much from a nation that created the ecosystem to build the company. In the meanwhile, Tik Tok has other plans to convert itself into a US company, sign a long term alliance with Oracle and operate in the US sans the burden of Chinese ownership.
Why Tik Tok came to the fore?
In a way, Tik Tok is representative of what China has managed to do right and where the US has ceded leadership to China. It is about the start-up eco- system, where China is catching up fast. In fact, if you look at India, players like Ant and Tencent have a much bigger stake in the Indian start-up ecosystem than any of the US players. Tik Tok has around 200 million registered users in the US and clearly that is perceived as a distinct threat. The US does not want a situation where China manages to get a much larger US mind space. That is the genesis of the entire Tik Tok issue.
China has other plans
While unofficial estimates have pegged the valuation of Tik Tok, US at around $30 billion, China has other plans. It recently passed a new rule barring transfer of software intellectual IPs and algorithms to non-Chinese acquirers without the approval of the Chinese government. That means; Bytedance will have to either sell Tik Tok to Oracle without the all-important algorithm or wait for China government to approve the sale. Neither seems likely to happen. It would be interesting to see what happens when the deadline expires on 20 September. Most likely, Trump may freeze Tik Tok, but that is hardly going to influence China’s final decision.
Who blinks first is the issue
China displayed tremendous fighting spirit in the Sino-US trade war. China is in a much better position to fight an economic war due to its unique position in global trade and investments. In the next one year, China is the only country likely to show positive GDP growth, even as the global economies contract. For China, the Tik Tok issue is just an extension of the trade war extrapolated to its investments. It cannot afford to allow the US to dictate terms and that was made clear in the trade war. Now China wants to use Tik Tok to send that message again. Time may be running out for Trump as elections approach. It may be a case of; who blinks first?
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