Two years ago, the Chinese government said it would oppose any forced sale of TikTok, which is owned by ByteDance, one of the country’s biggest internet companies.
After the U.S. Supreme Court ruled against TikTok on Friday, Beijing could find itself in the position of deciding whether to try to block a sale.
TikTok has spent much of the last five years trying to deflect Washington’s concerns about its ties to China. It has moved staff outside China; explored deals with Microsoft and Oracle; and appointed a Singaporean chief executive, Shou Chew, who testified before Congress in 2023.
None of that relieved lawmakers’ fears that TikTok could be used to spread false information or give the Chinese government access to sensitive data about the app’s 170 million users in the United States. The Supreme Court has now upheld a law passed by Congress last year to force the sale of TikTok or see it banned.
Any sale or divestiture of TikTok would have to comply with China’s rules on technology exports, Shu Jueting, a spokeswoman for the ministry of commerce, told reporters in 2023.
Those rules say that the Chinese government must approve the export of a list of restricted technologies. Beijing claimed the last word in any deal involving TikTok when it updated that list in 2020 to include systems like the app’s algorithm, which recommends a constant stream of short videos targeted to keep people scrolling.
Beijing has given no formal indication that it would look upon a deal favorably. Last March, Wang Wenbin, a spokesman for China’s foreign ministry, said it was “sheer robbers’ logic to try every means to snatch from others all the good things that they have.”
Legal experts said that if Beijing approved the export of TikTok’s algorithm, ByteDance might still be required to seek a license from the Chinese government to sell the technology to a foreign buyer.
But it is not clear how China would enforce this rule, since TikTok’s algorithm is already being used in the United States, said Donald C. Clarke, a specialist of Chinese law at George Washington University Law School.
Another way the Chinese government could assert leverage over a deal involving TikTok would be by exercising its “golden share” in a unit of ByteDance. In such an arrangement, the Chinese government buys a small portion of a company’s equity in exchange for a seat on its board and veto power over certain company decisions.
In 2021, an investment fund controlled by a state-owned entity established by a Chinese internet regulator took a 1 percent stake in a ByteDance subsidiary and appointed a director to its board.
This share structure has mainly been used to strengthen regulators’ oversight of companies that produce media for the Chinese market, according to Kendra Schaefer, a partner at Trivium China, a research and advisory firm.
ByteDance makes several of China’s most popular apps, including Douyin, a app similar to TikTok that’s only available in China, and the widely used news aggregator Toutiao. Both are powered by recommendation algorithms.
Many different Chinese regulators could claim authority over a transaction like a TikTok sale, which could add further complications, Ms. Schaefer said. “Approval could get messy considering how many regulatory cooks are in the kitchen,” she said.
