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As reported in the Wall Street Journal today (and also widely in other publications), the Biden administration is now demanding that, due to security concerns, the owner of TikTok, Beijing-headquartered Bytedance, either sell their stakes in the video-sharing app or face a U.S. ban. The question of sanctions or a ban against Bytedance have been rumbling in the background since August 2020, when Trump elevated the issue in the lead-up to the November election. Since that time, the Biden Administration has generally kept in place tough-line Trump-era policies vis-a-vis China, but has replaced Trump’s go-it-alone, chaotic style with a coherent approach well coordinated with U.S. traditional allies. From the outside looking in, the Bytedance issue was neither shelved nor resolved by the Biden Administration. It was in limbo. However, yesterday’s report suggests that the Treasury Department’s Committee on Foreign Investment in the United States — charged with making determinations about the admissability of (usually prospective) investments into the U.S. — has now come to a fully-vetted, interagency-coordinated determination. Bytedance either needs to fish (sell their stake in Tiktok) or cut bait (lose access to the U.S. market).

It’s a complicated and convoluted path that brought us to this point. What are the eight key facts to know to make sense of where we are and where this likely leads:

1. IT AIN’T OVER UNTIL IT’S OVER: Yesterday’s report is reliable but neither CFIUS nor the Biden Administration have released any specifics officially. Even were that to happen today, the outcome is still subject to a process whereby Bytedance and its lawyers will have an opportunity to respond to the official demand.
2. THE TOP-LEVEL SECURITY CONCERN: Data, data, data. Specifically, data about the 66 million Tiktok users in the U.S. which could fall into the hands of an adversarial government. To take a single example, think of facial recognition. Because privacy protections for individual citizens in China are de minimus and, more to the point, because the PRC government runs a globally-unrivalled surveillance apparatus to control its citizenry, facial-recognition technology is more advanced in China than in the U.S. or elsewhere. Combining China’s facial-recognition technologies with Bytedance’s trove of images of U.S. citizens could open a Pandora’s box of risk, both known and unknown.
3. THE BEDROCK SECURITY CONCERN: Chinese hacking into the personnel records of 4 million current and former U.S. government workers in 2015 shows clearly that the PRC values, and will run risks to procure, data on U.S. citizens. The bedrock security concern in the U.S. is that as long as Beijing-headquartered Bytedance owns the video-sharing Tiktok app, the Chinese government can force Bytedance to turn over that data at any time. Unlike the U.S. or most other markets, there would be no meaningful legal mechanisms to protect Bytedance against a demand of this sort. And, as Xi and the CCP showed last year with its treatment of Alibaba, there is scant concern for damage inflicted on a technology-innovating market giant if it is deemed to serve the greater good (as defined by Xi Jinping).
4. HURRY UP AND WAIT: It’s important to note that the first burst of attention to Tiktok came in the lead-up to the 2020 election and this apparent new burst of attention is happening as we approach primary season for the 2024 election. While there is broad and bipartisan support in governmental circles for the tough line on China which has been taking shape over the last five years, the Tiktok issue has recently been showing signs of developing a red vs blue fissure. Specifically, governors have been banning Tiktok on the devices of employees in their respective states. As of last month, 27 states had instituted such bans, including Florida and Texas. With a few notable exceptions such as Maryland and New Hampshire, the other states tend to be ruby-red. The Biden Administration was at risk of having its superb CHIPS Act front-line against China outflanked by a Republican rear-guard using Tiktok as a political cudgel.
5. BETWEEN THE HAMMER AND THE ANVIL: Bytedance and Tiktok have tried various maneuvers to extricate their video-sharing app from its unenviable position caught between Beijing and Washington. For starters, Bytedance has tried to make itself invisible in the U.S. debate because of its obvious proximity to Zhongnanhai. Secondly, Bytedance and Tiktok have pushed Tiktok’s CEO, Singaporean Show Zi Chew, as the public face for Tiktok and pointed to its globally-distributed headquarters (in Singapore, in California and Texas-based offices in the U.S., and in Paris and Berlin and elsewhere) as reason not to fear the PRC’s control. And as recently as last week, Tiktok has publicly committed $1.3 billion to expand its Project Texas datacenters initiative in the U.S. and Europe to provide greater public transparency (into its data collection, algorithms, etc.) and to allow Oracle to scrutinize its internal data collection processes. These are all impressive dance moves but are not enough to stop the curtain being brought down on Tiktok’s U.S. show.
6. THE NEAR UNSTOPPABLE DRIVER: Politics, politics, politics. Tencent’s WeChat has been proven to be a more nefarious platform for siphoning data from U.S. citizens and delivering it to PRC security minders. However, WeChat (and its Chinese language Weixin) is not widely-used in the U.S. among non-Chinese speakers. It’s therefor mostly invisible to U.S. government politicians and regulators. Tiktok, on the other hand, is virtually ubiquitous among young users, the generation which includes the children of those politicians and regulators. As attitudes toward China continue to darken in response to the last five-plus years of Xi Jinping’s overreach, the “Tiktok threat” has become the simplest and most potent storyline to channel fear of China.
7. THE BOTTOM LINE: Plaintively but quite accurately, Tiktok’s official spokesperson, Brooke Oberwetter, responded to news of the Biden Administration demand yesterday by saying, “If protecting national security is the objective, divestment doesn’t solve the problem: a change in ownershiop would not impose any new restrictions on data flows or access.” In fact, much of the data which U.S. government officials and regulators are seeking to protect through this policy toward Tiktok could be procured — albeit very laboriously and expensively for Chinese spy agencies — through commercial transactions on the darkweb. The ultimate solution to guard against the risks associated with Tiktok and other Chinese social media platforms is for the U.S. to institute stronger consumer privacy protections across the board affecting all social media platforms — Chinese, U.S. and other. Obviously, U.S. Big Tech doesn’t want to see this and, equally obviously, this is a bridge too far for the U.S. Congress to consider as we head to the 2024 electoral primary season.
8. THE FINAL OUTCOME: Those with reason to know the final outcome won’t be talking and those who are talking don’t likely know. I am squarely in the second camp but I will hazard a guess. The threat to force Bytedance/Tiktok to sell off its U.S. Tiktok holding was made earlier in the Trump Administration. Characteristically, it was delivered mostly as top-of-his head muttering by Trump himself and didn’t carry the institutional heft of the Biden Administration’s lengthy CIFIUS review. But then, just as now, the demand does not bring about an immediate outcome. It initiates what is effectively a high-stakes business and legal negotiation between the U.S. Government and Bytedance/Tiktok leadership. While unlikely at this point, the either/or could even morph into some third-way which would take time for both sides to explore thoroughly. It’s now a more coherent and higher-stakes ultimatum, but it’s the same ultimatum Bytedance/Tiktok was given two and a half years ago. Biden now has his political flank reasonably well protected from Republican China-bashers. I expect the final resolution of all this to take some time. But the clock is ticking. Tick tock …