Hours before TikTok CEO Shou Zi Chew was set to appear before Congress on Thursday, the Chinese government said it would strongly oppose any forced sale of the company.
The move blocks a recent push from the Biden administration to pressure TikTok’s Beijing-based owner, ByteDance, to sell the company. Lawmakers in Washington have argued that TikTok’s opaque algorithms could be used to promote pro-Beijing messaging to millions of users, and have voiced concerns that TikTok’s ownership makes it easy for the company to turn over user data to the Chinese government.
Because a sale of the company would involve technology export issues, it would need the approval of the Chinese government and compliance with Chinese law, Shu said. “The Chinese government will make a decision in accordance with the law,” she said.
ByteDance has said 60 percent of the private company’s shares are owned by large international investors and that the other 40 percent are owned by the company’s founders and employees.
Members of Congress on Thursday made the argument that China’s official resistance was an indication that the Chinese Communist Party owns the company, which TikTok has repeatedly denied.
The U.S. government also has authority to block a cross-border sale of similar businesses. American officials with the Committee on Foreign Investment in the United States, a cross-agency group known as CFIUS, have blocked and reversed sales of technology companies, such as the gay dating app Grindr, to Chinese buyers in recent years by citing data-privacy or security concerns.
Since CFIUS began reviewing TikTok in 2019, the company has proposed a $1.5 billion restructuring deal known as Project Texas that it says would store U.S. user data in servers run by the Texas-based tech giant Oracle, which would also review the app’s code. But CFIUS officials told the company in recent weeks that the mitigation effort was not enough and that only a full divestiture would resolve their concerns.
A Treasury spokesperson in a statement Thursday did not directly respond to the Chinese statement but suggested that it was unlikely to approve TikTok’s operation as it is currently set up. “CFIUS takes all necessary actions within its authority to safeguard national security and will not clear any transaction unless it determines there are no unresolved national security concerns,” it said.
CFIUS began reviewing the company after ByteDance bought a popular karaoke app, Musical.ly, for a reported $1 billion in 2017. That deal prompted the review, which could result in a rejection of the Musical.ly purchase — which would possibly unwind TikTok as a business.