It’s getting harder for tech companies to bridge the US-China divide

Corporations have never been able to cleanly separate their activities from geopolitics. Now, technology firms are finding it increasingly difficult to work across the US-China divide. Try as they might to cross-pollinate through research and investments, the climate between China and the United States continues to deteriorate into political one-upmanship, leaving users to pay the steepest costs.

The Trump administration's recent order to remove TikTok and WeChat from American app stores over alleged cybersecurity concerns was a direct challenge to China's own efforts to build the next generation of global technology companies. At the heart of the conflict is deeply personal politics. Both apps survive in China only by the goodwill of President Xi Jinping, and both were at risk of being removed from the United States by order of President Donald Trump.

WeChat and TikTok's recent trials show how the chief executives in both China and the US have outsize influence over the way modern technologies evolve. In the end, their self-serving actions are less about cybersecurity than about preserving their respective administrations' political interests.

Before the US Commerce Department's order to remove both apps took effect, ByteDance (which owns TikTok) announced a new agreement with Oracle and the Trump administration that will allow TikTok to continue operating in the US.

TikTok's partial divestment to Oracle and Walmart plays to Trump's personal politics.

However, that agreement appears to only shift financial assets from ByteDance to Oracle and Walmart, and move its American hosting platform from Google Cloud to Oracle Cloud. No significant change in oversight of the app's data practices was announced, and the largest ownership stake to change hands was 20% of TikTok (worth an estimated $50 billion), leaving majority control with ByteDance.

Meanwhile, banning WeChat in the US would do little overall financial damage to its owner, Tencent, because the ban wouldn't affect the company's highly profitable gaming and movie investments. Moreover, the vast majority of WeChat's 1 billion worldwide users remain within mainland China, with app downloads within Google Play's international store totaling just 100 million.

In fact, the most significant financial hit of the WeChat ban (which was temporarily blocked by a US judge) will be to limit spending by Chinese nationals in the United States, who rely on WeChat not just to chat but also to process peer-to-peer transactions and make cashless payments. And WeChat users in the US who resort to virus-ridden alternatives as a result of the ban could put themselves and their data at risk.

Political interests

In August 2018, Xi stated in a speech that without cybersecurity, there is no national security." Two years later, both he and his adversary Trump are exploring the meaning of that statement in their own ways.

Xi has hardwired his personal Xi Jinping Thought" ideology into his constitution and the nation's cybersecurity rules. Rumor-mongering is now a criminal action under China's cyber bureau, and mentions of Xi are meticulously policed. Even amid the covid-19 crisis, keywords related to Xi's handling of the pandemic were blocked, putting the leader's protection before efforts to investigate the political dimensions of the pandemic.

Trump, for his part, has reportedly asked for $5 billion from the TikTok-Oracle-Walmart deal to support his newly created patriotic education" commission, and secured a 20% American-owned stake in TikTok Global. Such moves benefit neither cybersecurity infrastructure nor the privacy of American users, but do reinforce Trump's political ideology in the run-up to the US election.

Embracing the personal nature of the politics involved, TikTok responded to the ban by appealing to business and political connections that have gotten Chinese corporations out of hot water with the US in the past. In 2018, telecom giant ZTE faced US policy restrictions for violating sanctions, amid fears that the company's telecommunications infrastructure might pose security risks. Facing a blockade similar to what TikTok and WeChat now face, ZTE cut a deal. Eventually, stricter policy actions aimed at the company were downgraded to a cash fine and what essentially became a probationary period.

TikTok's partial divestment to Oracle and Walmart plays to Trump's personal politics. At the heart of TikTok's appeals process is the notion that political safety is the path to survival within the Trump administration's America.

Security concerns supposedly motivated the Trump administration to ban TikTok and WeChat in the first place. Researchers examining both apps have documented security vulnerabilities. And ByteDance paid $5.7 million to settle a suit by the US Federal Trade Commission in 2019 for improper handling of underage users' data. Whether TikTok's deal will improve the app's security enough for US users to safely share data on the app remains unclear.

Pushback

Retaliatory action by China is almost certainly in the cards. Xi's government issued a statement (link in Chinese) on September 15 stressing greater oversight of the activity of private corporations.

In recent years, China has built up its burgeoning domestic software industry, primarily to police and monitor the conduct of its more than 900 million internet users. It has set out sweeping cybersecurity laws, most notably the 2017 China Internet Security Law, and granted party officials broad jurisdiction to enforce them. Internet firms are expected to comply with police requests.

Firms like Apple already operate within China while adhering to frequent takedown requests. The Trump administration's actions against WeChat and TikTok will likely bring tighter restrictions and more roadblocks for US companies attempting to do business in China.

Ultimately, though, it's the US-based users of both apps whom these conflicts will affect most. WeChat's removal, in particular, would jeopardize the ability of those in the Chinese diaspora to communicate with family members. As the geopolitical landscape shifts around them, they may soon find themselves without the technological tools they've come to rely on.

Rui Zhong is a program associate at the Wilson Center. She writes and researches on the politics of technology and business spanning China and the United States.