Trump receives implied approval from Xi for potential TikTok deal, contingent on negotiation of concessions in other areas.
In a significant development, the Chinese government has expressed concerns about the sale of TikTok's operations in the US, with a focus on the app's algorithm and intellectual property. The Chinese readout quoted President Xi Jinping as asking the US to 'refrain from imposing unilateral trade restrictions' and to 'provide an open, fair, and non-discriminatory environment for Chinese investors.'
Trey McArver, co-founder of research firm Trivium China, highlighted that the key issue for the Chinese side has always been about the algorithm and ByteDance's IP. The Chinese government will review the export of TikTok's tech and intellectual property licensing needed to complete the deal.
The latest negotiations have seen China securing significant concessions, with the US side obtaining a majority stake and control provisions, including data storage in the US and US government oversight. However, China is set to retain control over the app's core algorithm, allowing Beijing to have the final say. This arrangement could potentially conflict with US law, which prohibits cooperation concerning the operation of a content recommendation algorithm.
The backdrop of US-China relations has changed significantly, with Beijing viewing the TikTok deal as negotiable instead of a matter of principle. Experts suggest that Beijing has leveraged TikTok to secure concessions, which could include the US easing semiconductor export controls, investment restrictions, and potentially tariffs on China.
Despite the ongoing negotiations, a deal to spin off TikTok's US operations has not been finalized. Trump claimed that he and Xi had approved the TikTok deal following a nearly two-hour call, but Beijing offered little to suggest the deal is imminent.
In a positive development, Trump and Xi have agreed to meet in person. Trump plans to meet Xi at the APEC summit in South Korea next month, and Xi is expected to visit the US at an appropriate time. The two leaders last spoke by phone in June and pulled a tariff truce between their countries back from the brink of collapse.
Beijing's willingness to cooperate on TikTok showcases its flexibility in dealing with the mercurial Trump and the fluctuating state of bilateral ties. China's People's Daily, the ruling Communist Party's official mouthpiece, portrayed the latest TikTok deal as 'mutually beneficial' and based on principles of mutual respect, peaceful coexistence, and win-win cooperation.
As the negotiations continue, it remains to be seen how the US and China will navigate this complex issue while maintaining their respective interests. The fate of TikTok's AI-driven recommendation algorithm, the secret sauce at the heart of its global success, is a key sticking point in the negotiations.
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