Beijing Won't Allow Trump To "Steal" TikTok In "Smash & Grab" Deal

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by Tyler Durden
Tuesday, Aug 04, 2020 - 09:40 AM

During a press briefing at the White House on Monday, President Trump publicly affirmed that he would be fine with Microsoft or some other major American company buying TikTok from ByteDance, despite opposition from White House advisor Pete Navarro, who took to CNN to express his unhappiness with the deal Monday morning.

What came next surprised many of the journalists in attendance. After insisting that a deal be completed by the mid-September deadline imposed by CFIUS, Trump boasted that the US Treasury would get a "very large percentage" of the deal (the final number, Trump insisted, would be based on the size of the deal - but it would definitely be substantial. Trump then launched into an analogy, comparing the US government to a landlord and TikTok to a tenant.

"We make it possible to have this great success...TikTok is a tremendous success, but it happened in this country."

To be sure, Trump and the executive branch have unilateral power to cripple TikTok by adding it (and probably its owner ByteDance) to the US "entity's list" - the Commerce Department 'black list' to which Huawei, and dozens of other Chinese companies, have been added.

Trump's comments, apparently, created an opening for China's propagandists, who in an editorial that has grabbed the attention of the Western press, accused the Trump Administration of blatantly trying to "steal" Chinese technology, an act it called a "smash and grab" - likening the US to a desperate drug addict breaking into parked cars to try to find something, anything, to steal and trade for cash.

Read the full editorial below, courtesy of the People's Daily:

After vowing to ban the popular short-video sharing app TikTok in the United States on Friday, the US president is reportedly weighing the advantages of allowing Microsoft to purchase its US operations.

Such shilly-shallying is a tactic the US administration employed during the trade deal negotiations with China.

The tactic involves the president promising punishment for some perceived wrongdoing, followed by indications from other administration officials that the punishment might not be forthcoming. This is followed soon after by some close to the president saying that he intends to make good on his threat, sparking a sharp rise in tensions again. All with the aim of getting what the US administration wants.

So it was par for the course that after the ban on TikTok was proposed and then left hanging, that US Secretary of State Mike Pompeo told the media on Sunday morning that the president "will take action in the coming days with respect to a broad array of national security risks that are presented by software connected to the Chinese Communist Party".

Although it is yet to be known how that will work, the message will certainly heighten the concerns of Chinese companies.

As TikTok's experience shows, no matter how unfounded the claims against them are, as long as they remain Chinese companies, they will be presented as being a "Red threat" by the administration.

That being said, selling its US operations to Microsoft might be preferable for ByteDance, TikTok's parent company in China, as it is working "for the best outcome". And that being the case, the top US diplomat's comments on Sunday were tantamount to inviting potential.

US purchasers to participate in an officially sanctioned "steal" of Chinese technology.

Washington is well aware that Beijing will be cautious about retaliating like-for-like as it values foreign investment in China, and the sizable US investment in China is of more importance to the Chinese economy than the much smaller and shrinking Chinese investment is to the US economy.

Also, there is the additional bonus that coercing Chinese companies to divest their US business to US enterprises will not incur job losses.

The US administration's bullying of Chinese tech companies stems from data being the new source of wealth and its zero-sum vision of "American first". With competitiveness now dependent on the ability to collect and use data, it offers an either-or choice of submission or mortal combat in the tech realm. There are no carrots to promote cooperation only sticks.

But China will by no means accept the "theft" of a Chinese technology company, and it has plenty of ways to respond if the administration carries out its planned smash and grab.

The People's Daily's demand is ironic, since President Trump's ascendance to the presidency was due in part to his aggressive stance toward China, which he accused of stealing jobs, technology and economic might from the US.

Four years later, China's modus operandi for stealing American technology is well known. First, there are the "joint ventures" that China requires all foreign companies to establish before they can do business in China. This system is clearly designed to give Chinese firms access to valuable American technology as simply the price of doing business.

China's cyberespionage activities, run through the Ministry of State Security, have infiltrated some of the biggest companies in the west.

Sometimes, technology theft is orchestrated by Chinese companies, presumably on behalf of the MSS, like the now-infamous theft by Huawei engineers of "Tappy", a piece of technology developed by a team of engineers at T-Mobile, which figured heavily into a lawsuit filed early last year.

We could go on. But as for what this means for TikTok, the competing pressures from Beijing and Washington might make any deal impossible, particularly within the timeline demanded by the US.