Chinas parent tiktok tiktok, a popular short video product, has been negotiating with Microsoft crazy for the time being, after President Trump (DonaldTrump) vowed to stop the trembling sound coming into the US, presumably to sell its subsidiaries quickly before the administrative injunction comes into effect.
Tiktoks tiktok is, of course, Trumps real intention, rather than prohibiting the jitter entering the US, rather forcing the jitter to sell to American buyers. Trump has said he wants buyers to be very Americanized and even wants the buyers company to pay a fee to the US government, which has kept the sale price down with a threatening ban.
Although Trumps action may bring short-term benefits to the United States, it brings serious potential risks to the long-term interests of the United States, and destroys international and domestic business rules. After all, if the government thinks they can blackmail the private sector at will, how much business confidence is left for investors?
Byte skipping has many popular digital products in China, including a Chinese News Aggregator similar to Google news todays headlines. But its most famous product in the US, India and more than 140 other countries is its tiktok, which allows users to create, edit and publish short videos quickly and conveniently. The app is very popular (one might say its addictive), especially among young people. It was one of the most downloaded social media applications in the world in 2018 and 2019, and it can also be used for educational purposes. In both China and India, it has hosted some popular tutorial courses to teach English and American culture.
Forcing tiktok to sell to a very Americanized buyer will jeopardize the position of many US companies in China. There are more American companies operating in China than in the United States. In 2019 alone, the total amount of us new investment in China reached US $14 billion, an increase of US $1 billion compared with that in 2018, while Chinas investment in the US and Singapore in that year was less than US $6 billion. By 2018, the cumulative U.S. investment in China has grown to about $269 billion, almost twice the amount of Chinese investment in the United States (US $145 billion).
In addition, American manufacturing giants, such as general motors, general electric, DuPont, Merck, Pfizer, Eli Lilly, Bristol Myers Squibb, Boeing, Nike, Coca Cola, P & G, etc., as well as large service enterprises in the United States, such as Goldman Sachs, Morgan Stanley, Microsoft, Starbucks, KFC, McDonalds, etc., have maintained considerable scale of Chinese business. Their business in China is likely to generate 30% of their global profits.
If China follows Trumps strategy (claiming, in the absence of evidence, that some US multinationals are potential national security threats), they may be forced to sell their businesses to very Chinese buyers. Although the Chinese government has not yet done so, the possibility of doing so is gradually increasing.
The second major risk is that the United States may lose the support of some in China. In the past, when successive U.S. governments made demands on China in terms of human rights, the rule of law, intellectual property, information flow and climate change, many Chinese entrepreneurs, scholars and the public would support it. Many Chinese are eager to learn from Americans in order to achieve these goals in China.
Tiktok and other private Chinas practices have caused Chinas very different reactions. Trumps action looks like an attack on Chinese entrepreneurship, which will weaken the position of those who advocate a more market-oriented economic model in China. Why should China care about international norms when the so-called rule-based governance model becomes the law of the jungle?
If the United States has legitimate reasons to worry that tiktok will pose a threat to privacy or national security, it may be very different in dealing with problems. For example, the U.S. government could have informed byte skipping that it was not enough to store U.S. user data in the U.S., and then provide sufficient trading periods for the companys owners to sell their U.S. business on the open market, rather than forcing it to hand over to a very American buyer. British, Australian, Canadian, French, Singapore or Japanese companies should also be allowed to participate in the bidding. For future business, tiktok should have the chance to sell at a fair price.
This alternative method could have avoided all this: tiktok and other risks that followed. What trump does in essence is no different from what the United States has long accused China of: disrespect for private property, subordination of suspected crimes, misappropriation of the legitimate rights of foreign companies without compensation, and using arbitrary and opaque rules to prevent them from operating at home. There is still time for the trump administration to change its policy direction in order to avoid damaging the interests of the United States, but time does not wait.
Brief introduction of the author:
Wei Shangjin, a former chief economist at the Asian Development Bank, is a professor of Finance and economics at Columbia Business School and Columbia Universitys School of international and public affairs.
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