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How TikTok’s Owner Tried, and Failed, to Cross the U.S.-China Divide


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How TikTok’s Owner Tried, and Failed, to Cross the U.S.-China Divide

The Chinese entrepreneur behind TikTok took ample precautions when he set out to straddle the tech world’s most treacherous divide: the one separating China’s tightly controlled internet from the rest of the planet.

He made TikTok unavailable in China so the video app’s users wouldn’t be subject to the Communist Party’s censorship requirements. He stored user data in Virginia and Singapore. He hired managers in the United States to run the app and lobbyists in Washington to fight for it on Capitol Hill.

None of that counted for much in the end. With TikTok now negotiating a sale to Microsoft under intense pressure from President Trump, who said on Monday that he was giving the go-ahead to such a deal, the digital wall between China and the United States is proving to be higher than ever at this moment of widening conflict between the two countries.

Only this time, it is the U.S. government, not China’s, that is putting up the barricades — an escalation that could foretell an even more restrictive time for companies in both nations.

ByteDance, the eight-year-old Chinese social media giant behind TikTok, is China’s first truly global internet success story. The company’s founder, Zhang Yiming, 37, began pushing to expand overseas early on, believing that only a company with worldwide reach could remain on the technological edge.

But TikTok ended up resonating with American teenagers when even a platform for short viral videos is subject to political scrutiny. Under China’s leader, Xi Jinping, the Communist Party has emphasized its ultimate authority over Chinese people and businesses. Suspicion never dissipated that TikTok — no matter how many non-Chinese executives it put in charge — might be unable to withstand pressure from Beijing to surrender user data or manipulate content.

Similar doubts already hang over many other Chinese tech companies. TikTok’s sudden change of fortune could force them to re-evaluate their own international ambitions.

Chibo Tang, a partner in Hong Kong at the venture capital firm Gobi Partners, said that, increasingly, his advice to Chinese tech companies was to steer clear of the United States when expanding overseas — to follow instead the Chinese government’s diplomatic overtures and investments in places such as Southeast Asia, the Middle East and Africa.

For Mr. Zhang of ByteDance, TikTok’s run-in with the Trump administration has been an education in government relations, though hardly his first.

As TikTok became a smash hit in the United States, concerns arose about whether the app was censoring content that might offend Beijing. Late last year, The New York Times and others reported that CFIUS was looking into the Musical.ly deal. Washington politicians also began voicing fears that TikTok could be a conduit for China to meddle in American elections.

With pressure building, some of Mr. Zhang’s investors and advisers offered ideas for putting distance between TikTok and ByteDance, including reorganizing TikTok’s corporate or legal structure.

In an interview in November, Alex Zhu, a founder of Musical.ly who was then the head of TikTok, said the company wouldn’t rule out such changes.

“We continuously look at the company structure and optimize the structure,” Mr. Zhu said.

But instead of a major restructuring, Mr. Zhang opted for personnel changes. This spring, he reshuffled ByteDance executives in China and said he would personally devote more time and energy to Europe, the United States and other markets. In May, Liu Zhen, a former Uber executive in China who had been overseeing ByteDance’s global expansion, left the company. Mr. Zhu was replaced as TikTok’s head by Kevin Mayer, a veteran Disney executive in the United States.

ByteDance also embarked upon a lobbying push in Washington to sell the idea that TikTok’s allegiances were with the United States, not China. In meetings with lawmakers, lobbyists emphasized the app’s light, uplifting fare and the fact that many of its top leaders were American residents.

Last month, when American technology companies including Facebook and Google began reassessing their operations in Hong Kong in the wake of a new security law that gave the Chinese government greater powers in the territory, TikTok went further, announcing that it would stop operating in Hong Kong completely.

The move let TikTok demonstrate its willingness to stand up to Beijing, as its head of U.S. public policy later emphasized in an email newsletter to Capitol Hill. But Hong Kong had not been a major market for the app, making the decision look more like a publicity stunt than a self-sacrifice made on principled grounds.

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