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Analysis: Is TikTok really Chinese?

Mar 18, 2024, 9:54 AM

TikTok and its Chinese parent company ByteDance are suing the U.S. federal government over a law th...

FILE: TikTok and its Chinese parent company ByteDance are suing the U.S. federal government over a law that would ban the popular video-sharing app unless it’s sold to another company. (Kiichiro Sato, Associated Press)

(Kiichiro Sato, Associated Press)

Originally Published: 18 MAR 24 06:14 ET

Updated: 18 MAR 24 06:15 ET

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Hong Kong (CNN) — The future of TikTok and its ties to the Chinese government is mired in uncertainty in the United States after the House of Representatives passed a bill last week which could ultimately lead to the wildly popular video app being banned.

US lawmakers are concerned about Beijing’s influence over the app, and are trying to force its Chinese owner to give up control.

 

In particular, they worry that TikTok, which is owned by Beijing-based ByteDance, could share data with the Chinese government or manipulate content displayed on its platform. So far, there’s little evidence to support these concerns.

TikTok has never operated in mainland China — a fact that its Singaporean CEO, Shou Chew, has repeatedly touted when grilled by American officials. So, just how “Chinese” is it, and why does that matter?

Is TikTok Chinese?

On the face of it, the answer would appear to be “no.” It was first incorporated in California in April 2015, according to US court documents.

TikTok has never existed in mainland China, though the app was available in Hong Kong until July 2020, when it pulled out shortly after Beijing imposed a controversial national security law in the city.

At the time, the app was trying to distance itself from China in the face of growing pressure from the Trump administration.

 

In China, there is a different version of TikTok: a sister app called Douyin.

It launched before TikTok and became a viral sensation in the massive mainland market. Its powerful algorithm became the foundation for TikTok and is key to its global success.

In March 2023, CEO Chew was repeatedly pressed by US lawmakers on whether TikTok was Chinese. He didn’t answer the question directly, saying only that the app was not available in the country and that it was headquartered in Los Angles and Singapore.

Related: Utah vs. TikTok: What comes next?

But TikTok is ultimately owned, through a complex multi-layered corporate structure, by ByteDance, a privately owned technology giant.

The app is owned by TikTok LLC, a limited liability company incorporated in Delaware and based in Culver City, California. The LLC is controlled by TikTok Ltd, which is registered in the Cayman Islands and based in Shanghai. That firm is ultimately owned by ByteDance Ltd, also incorporated in the Cayman Islands and based in Beijing.

ByteDance’s website shows that the company developed TikTok as a global short video product and formally launched it in May 2017. Six months later, it acquired rival Musical.ly and subsequently merged it with the main platform.

According to TikTok’s own website, its subsidiaries around the world are all structured under Bytedance Ltd.

Is ByteDance Chinese?

Definitely.

ByteDance was founded in 2012 in Beijing by Zhang Yiming and Liang Rubo, who were college roommates at Tianjin’s Nankai University, according to company information and Zhang’s public speeches.

It has been based in the Chinese capital since then. In 2021, Zhang announced he would step down as CEO of ByteDance and handed the reins to Liang.

ByteDance has more than 110,000 employees globally. Besides TikTok, it owns a number of popular Chinese apps such as Douyin, news aggregator Jinri Toutiao, video-sharing platform Xigua.

At last year’s congressional hearing, Chew didn’t directly answer any questions about whether ByteDance is a Chinese company either.

He only said ByteDance is a Chinese-founded private company operating many businesses in China, but is “global” in nature.

Chew added that 60% of ByteDance is owned by global institutional investors such as the Carlyle Group, General Atlantic and Susquehanna International Group, while 20% of the firm is owned by Zhang and 20% owned by employees around the world. Three of the company’s five board members are Americans, he said.

Does the Chinese government own or control ByteDance or TikTok?

Chew has emphatically told Congress that ByteDance is not owned or controlled by the Chinese government.

However, like most other Chinese companies, ByteDance is legally compelled to establish an in-house Communist Party committee composed of employees who are party members.

Zhang Fuping, the company’s vice president and editor-in-chief, serves as the secretary of the party committee. The committee often holds sessions to study the party and Chinese leader Xi Jinping. One session in 2018 was joined by Zhang Yiming and his management team, according to the Beijing government.

Also, like its competitors, ByteDance has had to allow the Chinese government to take a so-called “golden share” in one of its key subsidiaries.

That means the Chinese government now owns 1% of Beijing Douyin Information Service, which is the domestic Chinese unit of Bytedance. Wu Shugang, an official from the Cyberspace Administration of China, the country’s internet watchdog and censor, sits on its board.

Analysts have said the “golden shares” provide a way for the Chinese government to get more directly involved with the day-to-day businesses of tech companies, including in the content they provide to the public.

Chew has admitted that the “golden share” exists. But he said it was for the purpose of internet licensing for the Chinese business.

ByteDance said on its website that it’s a common arrangement for companies operating news and information platforms in China and doesn’t affect its operations outside the country.

Can the Chinese Communist Party manipulate ByteDance or TikTok?

As a China-based company, ByteDance is subject to a myriad of national intelligence, data security and cybersecurity laws.

In 2018, China amended its National Intelligence Law, which requires any organization or citizen to support, assist and cooperate with national intelligence work.

That means ByteDance is legally bound to help with gathering intelligence.

In 2021, China introduced a new data security law, which applies to data processing activities conducted outside of the country that may “harm the national security or public interests.”

There is also a cybersecurity law in China, which says the state will take measures to monitor, prevent and handle cybersecurity risks and threats “arising both within and outside the PRC’s territory.”

These vague and broad laws apply to technology companies and may be used to regulate them.

Can Beijing prevent the sale of TikTok?

Yes, Beijing has the legal ability to do so and has already indicated it would.

In August 2020, following an attempt by the Trump administration to force the sale of TikTok, Beijing revised its export control rules to cover a variety of technologies it deemed sensitive, including technology that appears similar to TikTok’s personalized information recommendation services.

A few years later, in early 2023, a Commerce Ministry spokeswoman said in the government’s first direct response to the matter that China would oppose any forced sale of TikTok.

This is because a sale or divestiture of the app would involve “exporting technology” and had to be approved by the Chinese government, said Shu Yuting, the spokeswoman.

Beijing has not indicated any change to this position since that time.

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Analysis: Is TikTok really Chinese?