The Chinese government has taken a stake and a board seat in TikTok owner ByteDance’s key Chinese entity, Beijing ByteDance Technology, The Information reported on Monday, citing corporate records and people with knowledge of the matter.
Beijing ByteDance Technology sold a 1% stake in an April 30 deal to WangTouZhongWen (Beijing) Technology, which is owned by three state entities, the media outlet said, citing Tianyancha, an online database of China’s corporate records.
The deal also allowed the Chinese government to appoint a board director at Beijing ByteDance, it added, attributing it to two people with knowledge of the arrangement.
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The deal does not give the Chinese government any stake in the firm’s hit short video app TikTok because of ByteDance’s complex corporate structure, The Information said.
ByteDance told Reuters the Chinese subsidiary referenced in the report only related to some of its China market video and information platforms, and held some of the licences they require to operate under local law.
What it mat mean for TikTok
TikTok’s US operation has been under scrutiny over concern of Beijing’s involvement with its business, and the possibility that the short video app could be forced by the Chinese to hand over users’ private data when needed.
Former US president Donald Trump had hung on the risks such development may pose to US national security and signed executive orders targeting TikTok’s business in America. The orders which included attempt to force TikTok to sell its US operations to American companies have been rescinded by current president, Joe Biden, but Washington is still wary of the danger unchecked relationship between ByteDance, TikTok’s parent company, with Beijing could pose to the United States.
The news that the Chinese government has taken a stake and a board seat in ByteDance may trigger a new wave of scrutiny for TikTok that has been basking on its newly found freedom. With millions of people around the world embracing the video app, it has beaten all growth expectation. Early this month, TikTok overtook Facebook, WhatsApp, Instagram and Facebook Messenger — all of which are Facebook owned as the most downloaded app, even in the U.S.
While Biden reversed Trump’s executive orders targeting TikTok, he introduced new executive orders requiring the Commerce Department to review apps with ties to “jurisdiction of foreign adversaries” that may pose national security risks.
In evaluating the risks of a connected software application, several factors should be considered. Consistent with the criteria established in Executive Order 13873, and in addition to the criteria set forth in implementing regulations, potential indicators of risk relating to connected software applications include: ownership, control, or management by persons that support a foreign adversary’s military, intelligence, or proliferation activities; use of the connected software application to conduct surveillance that enables espionage, including through a foreign adversary’s access to sensitive or confidential government or business information, or sensitive personal data; ownership, control, or management of connected software applications by persons subject to coercion or cooption by a foreign adversary; ownership, control, or management of connected software applications by persons involved in malicious cyber activities; a lack of thorough and reliable third-party auditing of connected software applications; the scope and sensitivity of the data collected; the number and sensitivity of the users of the connected software application; and the extent to which identified risks have been or can be addressed by independently verifiable measures.
Under this new rules, Beijing’s involvement with ByteDance may revitalize the scrutiny which have been relaxed over the last six months. Although ByteDance has repeatedly said that TikTok operates independently, and it’s not under the influence of Beijing’s operations, US lawmakers have found it hard to believe.
The lawmakers have warned those in government, including service men to stay away from TikTok to avoid the risk of exposing classified data to a hostile nation.