In another sign of China’s tightening grip on the country’s growing technology sector, the government has taken an ownership stake in a subsidiary that controls the domestic Chinese social media and information platforms of ByteDance, the Beijing-based company that owns TikTok.
In any case, it suggests that China is pushing for more sway over ByteDance, whose TikTok-like platform inside of China is called Douyin.
China’s government has acquired a 1 percent stake in and one of three seats on the board of Beijing ByteDance Technology Co. Ltd., the subsidiary that holds licenses that underpin the company’s domestic video- and information-sharing platforms, according to a person familiar with the matter, who spoke on the condition of anonymity to discuss sensitive matters. The Information earlier reported news of the acquisition.
Holding one of three board seats suggests that the government has obtained a level of influence at the Chinese subsidiary beyond its small equity stake.
TikTok has grown explosively outside of China in recent years, now ranking as one of the world’s most downloaded apps.
Former president Donald Trump attempted to ban TikTok via executive order in 2020, saying that he aimed to protect national security and prevent Beijing from exploiting the app to collect user data or disseminate propaganda.
President Biden in June revoked that order, replacing it with a process to scrutinize whether apps controlled by a foreign adversary present risks to U.S. national security or to Americans’ sensitive personal data.
Senior Biden administration officials said at the time that they remained concerned about the risks posed by apps owned by Chinese companies but wanted to establish a more “robust” process for reviewing them. They noted that the Trump administration’s ban order had faced several court challenges that led judges to temporarily block the ban while the cases proceeded.
Matt Perault, director of Duke University’s Center on Science & Technology Policy, said he didn’t think the Chinese government’s involvement with the Chinese subsidiary should necessarily change the United States’ national-security assessment about TikTok. But he acknowledged that both Republican and Democratic officials have expressed concerns about TikTok.
“Scrutiny and skepticism about Chinese firms operating in the U.S. is a bipartisan issue, and both parties seem to be climbing over each other to demonstrate who can take a harder line on China,” Perault said. “The atmospherics around this issue are more about potential risk and less about actual, demonstrated risk.”
TikTok spokeswoman Hilary McQuaide said she couldn’t comment on the Chinese subsidiary because it is “specific to ByteDance’s China-market platforms” and “isn’t relevant” to TikTok.
China’s move comes amid a months-long push by Beijing to assert more control over a domestic technology sector that has spawned a variety of successful and powerful companies active in social media, music streaming, online shopping and mobile payments.
In recent months the government has barred its leading ride-hailing company from app stores; imposed new interoperability requirements for online platforms; driven out cryptocurrency exchanges; and forced tech companies to scrap their stock-market listings. Antitrust investigations have also targeted digital giants Alibaba and Tencent, and temporarily stopped Tencent’s popular WeChat messaging app from registering new users.
With its TikTok-like platform, Douyin, and its popular Chinese news aggregator app, Toutiao, ByteDance is a powerful force in China’s tech scene.
The government has long required Chinese media companies to heavily censor their domestic platforms to eliminate material deemed sensitive by the state, but Beijing of late has sought more control.
The acquisition of the shares in the ByteDance subsidiary was tied to a new Chinese regulation pertaining to video- and information-sharing platforms inside China, according to the person familiar with the matter, who said the regulation could prompt the government to take stakes in other social media companies.
The entrepreneur Zhang Yiming founded ByteDance in 2012 and built it into a global force.
TikTok’s rise in the United States has at times been shadowed by signs that Beijing was influencing the videos that could appear on the app. In 2019, The Washington Post reported that a search for “#hongkong” on TikTok yielded few images of the city’s pro-democracy protests, while such images were common on Twitter.
The Post also reported that ByteDance imposed strict rules on what could appear on the app, in keeping with China’s restrictive view of acceptable speech, a policy that sparked a backlash from the company’s U.S. employees.
ByteDance said at the time that the app’s content and moderation policies in the U.S. were led by a U.S.-based team not influenced by the Chinese government.
The company defended TikTok as a place for entertainment, not politics, and said its audience gravitates there for positive and joyful content as a possible explanation for why so few videos related to sensitive topics such as the protests in Hong Kong appear.
The Biden administration said in June that its scrapping of the Trump’s ban did not affect a separate Trump directive that instructed ByteDance to divest its U.S. TikTok operations. The interagency Committee on Foreign Investment in the United States, or CFIUS, was still reviewing ByteDance’s proposals to comply with that order, Biden officials said at the time.
The Treasury Department, which oversees CFIUS, didn’t immediately respond to a request for comment on Monday.