I haven't heard any message about this transaction.
Should this actually be what's happening?
It basically means that the attempts by the American political establishment to strong -arm bydance into selling the company has failed.
It seems likely that there's going to be another extension, would be my guess.
I think it must be one of the packages of the negotiations between these two governments.
So the lesson coming out of all of this is likely to see national and regional sensibilities around data sovereignty reinforced.
I also think it lays out the framework about what might happen in the future with other tech companies in China.
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Welcome to the Chat Lounge.
I'm Tian, joining me to explore TikTok's potential U .S. deal and its global tech implications.
Dr. Jomi, the Deputy Director of the Institute of American Endocenia Study, Chinese Academy of International Trade and Economic Cooperation.
Dr. Edward Lehman, founder and managing director of China -based law firm Lehman Li and Xu, and Warwick Powell, an adjunct professor at Queensland University of Technology in Australia.
Great to have you all back on the show, gentlemen.
So TikTok is once again making headlines.
Washington claimed a deal with Beijing was nearly complete, and President Donald Trump stated the deal is pretty much done.
and talks with China were about to begin.
He was talking about this past Monday or Tuesday.
So, Dr. Zhou, to your knowledge, have any talks on this issue begun or are currently underway?
How do you interpret the timing of these statements?
Well, personally, I have to say that I haven't heard any message about this transaction.
I think that it may be possible for both sides to discuss about the TikTok transactions or kind of the future, because it is one of the promises of Donald Trump in his election.
So he wanted to keep the TikTok, but also want to make it, I mean, have to meet the requirement of the United States frontiers.
And it is also true that China has some requirement for those companies who are investing in other countries.
So they have to discuss about the issues if those sides believe it is kind of a very important thing, has to get some result.
out. And in my understanding that since TikTok is one of a company in the digital economy, so there are so many innovations on the using of the data and also managing those critical messages of the different society based on the laws.
So it may be helpful for them to do some kind of examples to try to make the regulators believe that the operation of this company will benefit both sides of the government and the society, and will not break the law or violate the law or regulations of both countries.
I mean, that may be possible for them to reach some progress, but I don't know whether it is a time for them to just solve this problem, because when we are talking about the trade negotiation between these two countries, they are much more widely covered.
I mean, for the sectors, for some rules, for tariffs, not on specific company.
company. I think that may be a part of the deal, but I'm not quite sure.
All right. Then, Dr. Lehman, why do you think this deal actually matters so much to the Trump administration?
In fact, I think you would bring this up every now and then over the past few months, right?
Yeah, I mean, it means a lot to him.
I think that TikTok, like it or not, actually helped him to get elected.
I mean, he reached out to social media, which was unusual.
And for a guy that's his age, kind of non -conventional.
He's got a timeline that they're looking at, which is a U .S. national security law or concern.
It's called Protecting Americans from Foreign Adversary Controlled Applications Act, which mandates this divestiture or the ban has to go into effect by January 19, 2025.
And then that was extended.
And I think, you know, he made a big public pronouncement about that.
You know, he's a big guy in making a deal.
I don't think that he's necessarily stuck on ideology as much as he is on trying to make a deal and make something go forward. At the same time, I think that there are people who are in the Congress now who would like to, and it's an easy target to make this not work for TikTok or for the Chinese in any way, shape or form.
I think he's kind of overriding Congress and he's overriding public opinion with having this deal go forward. Although, like I said, 170 million people in the United States are using TikTok, which is insane, considering our population.
And from a third country's perspective, Professor Powell, do you see this as a, you know, a genuine policy update or more of a campaign play?
Look, the timing of all of these things is interesting because it has taken place against the backdrop of the cessation of the 90 -day hiatus for the Liberation Day tariffs, where many deals were promised at the outset, but very few have materialized.
We've also seen many promises about the state of so -called tariff negotiations between the United States and China over the course of the last six weeks or so, which have tended to overstate the extent to which there has been progress made on matters of serious substance.
And perhaps this speaks a little bit to a political culture and a communications practice in the United States, which is to speak in hyperbolic terms and to also seek to front -run potential discussions or negotiations with a view to shaping expectations and shaping those negotiations themselves.
So when I saw the reports of, you know, initially the impending deal, reports of a sale to Oracle and this, that and the other, I took all of that with a little bit of a grain of salt.
And of course, we've seen reports that have since been denied that ByteDance was developing a US specific set of applications.
And again, there seems to be a lot of noise surrounding this particular deal.
But my own sense is that it is unlikely to reach a resolution all by itself until and unless it becomes part of a wider set of deliberations.
Indeed, it takes two parties to make a deal, particularly in this case.
And on the Chinese side, in response to questions about the latest TikTok negotiations, a Chinese foreign ministry spokesperson said China has reiterated its position on multiple occasions without offering new details.
But to some extent, it actually provides some evidence to what Professor Powell just mentioned.
So, Dr. Zhou, can you refresh our memory?
Henry, what exactly is China's official stance on the TikTok situation?
Yeah, personally, I can only represent the government.
And I think that for China, there are maybe two kinds of things.
The first one is that we know TikTok is a private company.
So the operation should based on the decision of the market.
Maybe it is true that all the government have different regulations.
But we want to support the decision of the private sectors themselves.
So I think that fairness would be one of the principles.
we support these companies to operate in a fair ways and not be discriminated by just the nature or owners come from China.
And the second one in my understanding is that any companies who are related to China's market, they have to also obey the rules of Chinese government.
So when we're discussing about the practices of many Chinese companies, when they went abroad abroad or investing in other countries, there were also a lot of requirements for them to obey.
Like, you know, when they're talking about the technology, about the services, about the goods, they have to meet the requirement of the Chinese government when they are exporting something from China.
So this new situation has changed a lot when we're talking about TikTok, because the digital economies are creating some untouched fields, unmonitored areas by the government.
So when they are trying to discuss about what should be managed, what should be governed by Chinese government, there are a lot of things we have to discuss.
So respect the authority of a Chinese government is also important.
So I think these may be the principles we need to give the companies more confidence when they are doing businesses in the foreign markets.
They should be respected fairly and also based on the certainty and the stability of the rules.
I think that may be the messages we need to understand.
You provided a lot of information on this.
But actually, when English media report on this, they use the word sidestep.
Beijing actually sidestep this question.
So, Professor Powell, how would you interpret the tone and intent behind such a response?
Well, in some ways, it reflects the difference in practice, I guess, in terms of how governments and government officials engage in ongoing role in commentary in relation to issues that are currently at play.
So as I mentioned earlier, the American political culture and communications practice seems to seek to front run deals as in part a negotiating tactic, but there's also a hyperbolic element, particularly towards the ways in which President Trump seeks to talk up where things are at.
The Chinese side has historically, not just in this particular matter, but in many other matters, tended to take a much more less explicitly hyperbolic approach. And the responses, I think, from the foreign ministry states spokespeople really reflects that.
It's simply saying that China's position has been articulated before.
That position, of course, hasn't changed.
Those are the issues that will ultimately make or break any proposed transaction.
And they go to laws concerning the sale of technologies and whether or not those laws will be impacted by any proposed transaction.
The other thing that's important to bear in mind, other than the way that government is communicating its particular posture, is that the entire sort of commerciality of this transaction, so the talk is that it needs to be dealt with on market terms, but the entire commerciality of this has never necessarily made a great deal of sense for ByteDance.
many people think that TikTok USA is the make or break of ByteDance as a business and therefore the United States had an incredible amount of leverage over ByteDance but the fact is is that TikTok US revenue makes up less than 25 percent of ByteDance's total revenues that's not a small amount and it's not an amount that you'd walk away from but it's certainly not what you'd call the make or break leverage and so I think the situation is caught up in both some hyperbolic elements as far as American leverage is concerned, some aspirations from an American president who seems to be desperate to cut
deals and be seen to be making deals when in fact these are much more complicated than the issues first appear, and a Chinese government that's playing a very much a dead bat response, not only on this, but on just about all the other issues that are currently in the air with the United States.
And like you earlier mentioned that TikTok was reportedly developing a new version of its app exclusively for the US market, but it's been denied by the company in a statement the statement was uh says the reports are inaccurate and earlier by dance um the chinese parent company of tick tock denied reports it agreed to sell its uh u .s operations to a consortium led by oracle so dr lehman do you think a brand new app designed only for the us market is something um the company may eventually have to resort to given you know so many requirements, both in the United States and in China.
Yeah. I mean, that has been thrown around.
Again, a lot of it is shrouded in ambiguity.
What I can say for certain is what we're looking at from a legal standpoint.
So we've got a Supreme court case called Tick Tock versus Garland.
And that came out and it was in January.
And then I think it was adjudicated finally in April.
And then it was saying that there was essentially a ban.
So that's like the U S rules about it.
And then Mr. Trump, you know, that we have three branches of government.
He's the executive, the Supreme Court is infallible in the United States because they're final.
They're not final because they're infallible.
So they're the ones who have actually voted, you know, and adjudicated to ban TikTok because they're saying it's a foreign adversary that's controlling this.
Right, wrong, or indifferent, that's what the judgment was.
Now you've got China, which has its own laws, policies, and regulations, and they, the two really don't talk to each other.
So they They don't have in a lot of cases, they have these multilateral trades, treaties that oversee legal things such as if someone runs away with money to the United States, how do we get that money back and how do we extradite that person who might be a criminal in China and the money's there?
We don't have these kind of treaties, weirdly enough, between the United States and China.
And I bring this up just by way of comparison.
So we don't have those kind of practical things in place.
So we don't also have them in place for some corporate deals as well.
And so China has its own set of laws, policies and regulations as to the algorithms. I think that Professor Powell said before, I mean, ByteDance in the United States is doing perfectly well.
I think they have $146 billion in revenues as of 2023, and then there's like $7 billion in cash reserves.
I don't think that they have to do this very urgently.
The Supreme Court has told them that they have to do this or they're going to shut them down.
Mr. Trump then stepped forward and said, let's give them a little bit more time and sort out what the heck is going on.
And so I think that if you look at the Chinese rules, then there are a bunch of laws, policies, and regulations having to do with technology.
And this doesn't really fit into that narrative with national security and economic interests and algorithms. And the Chinese government has, they have different laws as with regards to what can be exported and what can be utilized across borders.
So we've got this confluence of events where we've got this new technology, we've got laws that are being put into place that aren't fully up to speed with a new technology.
And I think sometimes it might seem political, and I'm sure it is.
But at the same time, I think from the legal perspective, we don't really have the tools to fully figure out how to implement these things from a Chinese perspective or from a U .S. perspective.
But I do think everyone, I would imagine, would like to keep this thing going in some way, shape, or form.
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From the U .S. perspective, the Supreme Court actually can, like you said, just shut TikTok down, right?
The U .S. branch of TikTok.
That's correct. And that was what Mr. Trump, I mean, so that came down and they made an adjudication to ban it based on foreign adversary, you know, having this ability.
We may say, hey, is this unusual?
And the answer is no. And with regards to our history, foreigners couldn't own media in the United States.
For example, Rupert Murdoch had to become an American citizen in order to own some of the media concerns that he owns in the United States.
So this is not super unusual.
I mean, it's new players in a different kind of medium, but that's what they're saying in this particular case.
And so people have moved on, but the answer is yes.
This could have been banned.
Mr. Trump stopped the ban, extended the time, and they're sorting out folks to purchase and how to purchase.
And I think China, has come down strong and they have rules and laws and policies about uh exporting technology and the question is whether this was properly done or not and i think those are valid concerns why would uh president trump give this a extension you know three months extension then you know he gives a lot of reasons he talks quite a lot so it's hard to tell exactly but i think you know he does know people in this media space he does know people with a lot of money perhaps you know it's it's to allow them and of course tick -tock was i think instrumental in electing him i think he's
got got a young son that's 18, 19 years old.
So maybe he's listening to that.
He did some things like with ZTE when they were facing some kind of problems and bans.
He went light on that.
I don't recall all the details of that now, but there have been instances where corporations that are Chinese have been, you know, given a reprieve at the last moment.
And ZTE is another example of that.
But I think he truly wants to get a deal done.
I'm just speculating, but I mean, he likes things to be built and not necessarily tear stuff down, I guess.
It's a monolith. I mean, no one can deny that TikTok has changed the shape of social media in the United States and elsewhere.
But I think everyone is confronted, not just China and the United States, but with national borders having to do with social media.
And I think we've looked at this in other instances with Facebook.
Did that have anything to do with some disruption in the Middle East or in Africa?
You know, was that a problem?
And so I think all governments, rightfully so, should be cautious about how to proceed with these types of things.
But having ownership being in foreign hands for a U .S. organization that can get in touch with 170 million people is something to take pause with.
And China releasing such an incredible technology abroad and not having control of the algorithm is also something that they should be, well, their laws to protect you from doing that so these are directly at odds with each other legally speaking i'm not saying that has come to pass yet but i think in working out a deal they have to take those considerations into play all right thanks uh for explaining this from a legal perspective and maybe from a technical perspective uh professor powell do you see that this um developing a brand new app for the u .s market would be the only or ultimate choice
for tick tock or by dance eventually?
Well, look at it like this.
As Professor Lehman has indicated, there is in effect a ban that has had a stay of execution due to executive intervention by President Trump.
A ban, should it come into effect, in effect affects the company's revenues and those revenues make up between 20 to 25 percent of the company's global revenues and falling as a proportion.
So it's not a small amount of money, but should TikTok or ByteDance do nothing and the ban comes into effect, the company will survive.
And in fact, the company will continue to prosper in non -American markets.
The political downside for the Trump administration is not only the reputation around the President as a dealmaker, but I think more importantly than that is there is going to be over 100 million very disappointed and angry app users.
And I don't just mean young people who use it for sharing social related things, but in fact, the app itself has become quite an important part of cultural production, small business marketing, and the livelihoods of many individuals in the United States.
So there's actually an economic cost to the United States, and as a result of that, a political cost to the administration.
As far as an alternative US -only bespoke app is concerned, as you mentioned, that's been denied by ByteDance.
But should that be what ends up unfolding?
And of course, there's a big question mark as to whether that's actually the case or not, but should that be what is actually unfolding, then that's essentially a concession that there will be no sale.
The only reason why a bespoke US only set of algorithms and applications will be developed is because there has been a total rejection of any sale of the existing technological infrastructure, and it would be in effect a recognition by both sides of this equation that a sale will simply not proceed.
The idea of This app being developed is in effect being financed by a prospective sale.
Now this may be a function of American big tech interests really come into play because let's not forget there are also Substantial technology interests here not just from a technical point of view but from a commercial point of view ByteDance through this particular app has been cannibalizing some of the revenue potential of the United States market for established incumbent American big technology firms many of whom would like to grab some of that back So we have an intersection, if you will, of American political considerations, American big tech commercial considerations, and ultimately both
political and commercial considerations on the bite -down side, where, in my view, the commercial downsides are undesirable but ultimately manageable compared to the sale of a technology.
Technically speaking, of course, another bunch of code can be developed and a US -specific version of an app can be rolled out.
up. But should that be the case, that really represents a kick in the face to the attempts by the American political system to strong arm ByteDance into selling the business.
ByteDance is basically saying, look, we're not selling, you're not getting the app.
But if you guys want to finance us to build you a specific app for your market, then we'll certainly look at it.
But don't you think a brand new app for the U .S. market is a good idea?
Because it can avoid a lot of troubles, right?
Well, the question always is, is a good idea for whom?
For the company and for the regulators on both sides?
Well, from the company's point of view, as I said, it would be financed by a prospective acquisition so that there are some commercial upsides in that process.
Should ByteDance retain a portion of equity in an American special purpose vehicle that operates an American only app, then of course there are also revenue opportunities for the company as well.
But what this really says is the company isn't selling.
And if American commercial interests and political interests want to reclaim some of this market back from ByteDance, then it's going to need to pay for it.
In that sense, this delivers what you could call a commercial and political face saver.
But let's make no mistake about this.
Should something like this happen, and again, ByteDance has denied it, but should this actually be what's happening?
It basically means that the attempts by the American political establishment to strong arm ByteDance into selling the company has failed.
In that sense, ByteDance doesn't necessarily have to sell TikTok US because it can incorporate a new company, right?
And with this newly developed app specifically for the US market, wouldn't that be, I don't know, a good idea?
Maybe? be um look i think the issue is is that and from memory and professor loman can correct me if i'm wrong or at least fine -tune my answer but broadly speaking there is legislation uh in existence in the u .s that could actually be extended to another fully owned special purpose vehicle you know if it's if it's just another company and it's fully owned by bite dance um then we're going to literally come back to square one the talk that was doing the rounds was that this new app would would be developed for a new company that would have a minority ownership from ByteDance and a majority ownership
by an American consortium?
And in that case, what is in effect happening is that the American consortium is financing the development of a new app, accepting that part of the price that they pay for this is that ByteDance maintains an equity position in the new entity.
Is that a faceover?
You could argue that, and I think everyone can walk away being being not entirely humiliated in the process, which is, of course, a good thing.
But at the same time, it really means that the American political establishment did not get what it wanted.
All right. Dr. Lehman, do you have anything to add here or any disagreement?
No disagreement, just a fine tuning.
I think the devil with this or God for this is in the details.
And I think that this discussion about the new app is a way to, because most people don't know what's going on.
What does that mean, new app?
What does it mean, algorithm?
And certainly the the court doesn't know, and maybe the executive branch doesn't know, and Congress doesn't necessarily know.
So when they start trotting out stuff like that, maybe even China doesn't know, then it's, to me, as a rank and file person, just kind of understanding the basics of it.
There's intellectual property, there's know -how that's connected to this, that's international.
Then there's privacy and secrecy laws, which is national and can be international as well.
But I think it's a way to say, hey, I think we need more time to sort this out.
There was going to be a separate business and infrastructure in which all the user data would be stored on U .S. servers, possibly managed by Oracle to prevent access by ByteDance's China -based employees.
Then we also have to look at the actual structure.
Who holds the shares now?
So from my understanding, the shares are partly owned by Chinese nationals, and some of them are in the United States.
Some of them are in China.
They would fall under the jurisdiction of perhaps both of those jurisdictions and have to be able to obey by each one of them, just like one with taxes and other types of things that each one of these comes to play.
So I think, one, they're buying time.
Two, there are laws, policies, and regulations that regulate it.
Three, nobody knows what a new quote -unquote new app really means other than it's going to be some other type of entity.
To your point about whether they create this new enterprise, hey, we're Nuco over here.
We've got nothing to do with that guy behind the curtain over there, the bite dance.
That's another kind of, I think, a perception that one can create to allow folks to technically get past these U .S. Supreme Court ban.
Hey, we've created a new enterprise.
Now the question is, what does that precisely mean?
So it's hard to point fingers at anybody in particular.
I think that you're moving a billion person using app and then you've got 170 million that are in the United States.
and if there's any disruption with regards to those users coming on with a so -called new app I mean heck we tried to get health care online and that was a disaster in the United States and so could this happen here the answer is yes do you get a disruption in users the answer is yes would there be a valuation I think the valuation is between anywhere between 200 million I'm sorry billion and 400 billion for the U .S. portion of the business depends who you ask all the usual players are there that own shares or potential shares in this already.
And then you've also got Chinese nationals and individuals that own shares.
And some of them come with caveats or restrictions on those shares about who they can deliver those shares to for a whole bunch of reasons that we can't see.
Employment contracts, everything else.
So there's a lot to consider here.
I think someone's just going to take a plunge at it and then there will be litigation a plenty and accusations a plenty on both sides.
But I wish I could point to a huge villain in this thing other than, you know, this is something worthwhile that people don't necessarily want to destroy and does serve a purpose for folks and people are taking a look at it.
That's kind of where we're at with it.
Yeah, I understand the devils in the details, but legally speaking, it's a viable solution.
Or do you think it's absolutely hard to achieve?
Oh, no, I think legally speaking, it's viable.
The question is, what is a new enterprise?
What is a new app? Does it look different or is it a whole bunch of other things?
You've been listening to the chat lounge.
Check out the broader implications of the TikTok case for the global tech industry after the break.
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Welcome back to The Chat Lounge.
We continue our chat on TikTok's potential US deal and its global tech implications.
And on the Chinese side, Dr. Zhou, have you or your colleagues at the Academy ever discussed the possibility of this endgame scenarios?
Which one would be the most likely or most feasible solution then?
Well, I haven't discussed this problem with my colleagues.
I think that may be possible for us to look at some of the suggestions that TikTok is trying to involve according to the requirement of this local government in different countries.
The ownership is a problem, but also it is even more important about the spirit.
I mean, the spirit of this company is trying to give the people some platform for them to do businesses, to contact with each other, discuss about different issues.
But when it becomes our base of the network, it has a lot of new requirements and more things will be done according to the change of this technology or they are using some artificial intelligence.
so personally I would say that it is a kind of a very good innovation for the company who do business with the market and the government so I hope that they can still stick to the position in the United States I hope that is also our start maybe it's not only the only one who are doing this and they are encouraging more companies to do similar things but he's providing some new ideas of this technology so I think that maybe my my willingness that they they can do more to still provide more innovation space for the people of the United States.
And actually, if the United States want to have a separate requirement for this company, they need to adapt to this situation.
But also, there are so many new things that are not finally decided by the laws and the regulations.
So it's still possible for them to follow the requirement, or maybe the government can can change some of the requirements or they can do more innovation about the management.
Like what kind of innovation?
For us, you know, when the requirement about the ownership and also something to do with some management or other issues, I'm not quite sure whether they can do that, but maybe they can separate it.
So actually, that may be possible for just the requirement of the regulations and together with different practices and profitable ways of doing business still.
do. I assume that can be achieved if both sides of the U .S. government and the company, TikTok, have discussion on the possibilities and what they really want.
It's not that easy.
What kind of results can be achieved?
Can you be more specific?
You know, under the U .S. TikTok ban bill passed last year, TikTok's Chinese parent, ByteDance, must reduce its ownership below 20%, and the U .S. operations must sever coordination nation on algorithm and data sharing practices.
Do you think those conditions are acceptable to Beijing?
I cannot say that the government will have some decision on this acceptable, but because this company is owned by the private sectors, it's not a state -owned enterprise, so there may be some discussion space for the governments.
I think that the ownership is just a very leaker concept in the modern companies.
There are so many kind of practices.
They are dealing with the structure of the ownership and operation in a different way.
And like some companies are creating a certain kind of funds to support the ownership but also will not interfere with the operation level.
I don't think that may be the possible thing if the different stakeholders believe it can be the future of this discussion or negotiation.
All right. Then Professor Pao Well, if, like what TikTok said, developing a brand new app for the U .S. market is not accurate for them or probably at least for now they are not doing it, then what kind of solution do you think could be a choice for that company?
Well, as things stand, it would stay of execution, if you will, not be extended, then the ban would come into effect, and it would ultimately lead to the end of the company's ability to operate in the US market and to generate revenues from the US market.
The consequence of that commercially is obviously a big hit to the bottom line, but as I mentioned earlier, it will not be a death knell to the company at all.
In fact, the company's user base is predominantly outside the United States.
What's different about the United States is that the dollars per user is higher in the United States than elsewhere.
What it will mean for the company is that it will seek legal recourse where it can, and I'll leave that matter to the lawyers to consider and discuss.
us but commercially it will have no choice but to commit greater effort to consolidating its position in other markets of the world and growing not only its user base outside of the United States but increasing the revenue per user that is currently the case.
That's what the company will do and there is no reason why the company won't be able to do that and can't do that.
Is it possible for ByteDance to entirely give up the US market then?
Well, from a commercial point of view, losing the US market does not mean the end of the company.
And that's my point.
It may be a price that it needs to pay if firstly, it cannot sell or will not sell.
And if the US insists on going through with the ban, then that's what will happen.
That is in effect the worst case commercial scenario.
What does the company do in that circumstance?
Well, it has legal avenues it can pursue perhaps.
Ultimately, we'll need to see changes of laws and all those sorts of things, which I think are a long way off and highly unlikely in the current geopolitical environment, which really means the company will move away as far as its focus is concerned from developing the North American market and develop its business elsewhere.
You've got to remember, the world is a bigger place than the United States.
And so companies that are in effect not welcome to operate in the United States simply have to explore the rest of the world.
And that's what by it.
That's what we'll do.
Dr. Lehman, what's your take here?
You know, the rules are that it can't, the ownership has to be reduced to 20%.
Okay. So that's a U .S. rule.
And, but there's so many ways to get around that if anybody has any kind of, yeah.
I mean, it's, for example, I mean, when Mr. Trump becomes president, he has money as did Mr. Biden, as did Mr. Trump before that, as did Mr. Clinton, as Mr. Bush and Mr. Obama.
So when they become president, all their their money goes in what's called a blind trust. That means that you give instructions to a trustee to hold your stuff, whatever that is.
And then you can be both a trust, you can be both that which gives money to the trust or gives your rights to the trust, as well as be a beneficiary of that trust. It's something we have in equity and it's not something that they have in Chinese law per se, is civil law as opposed to common law.
And so it creates this fiction that you you don't really own this stuff, but the trust owns this stuff.
And it's been a tax dodge for people for a long time.
But one can reduce their share and say, I don't own it, the trust over here owns it.
But I'm the beneficiary of that trust, because I wrote the instructions on how and who can be the beneficial owner of the trust. So the trust is a different person.
It's not the same as a Chinese national.
It is an American trust, for example.
They have a bunch of reasons to break break down the walls, perhaps, of that trust. But it doesn't necessarily have to be an American trust. It can be in a different types of available to them.
But, you know, there's a whole bunch of players that are already trying to make that move.
General Atlantic and Susquehanna International Group and Mr. Trump kind of, you know, waves his arm and says there's a whole bunch of rich guys that want to buy this thing.
So it's not really fully detailed there.
But I think that if the Chinese wanted to wink, wink, nod, nod, retain some level, and it would have to be then subject to litigation of this reduct i mean to reduce to 20 and to have the same players be beneficial owners of that that's possible and you just have to get decent legal advice to be able to go forward with it and then the question is whether it'll be upheld in courts and it should be i mean trusts are held up upheld in court that means you don't technically control it and i just want to remind the listeners that naspa is a south african company and actually they came into our office
back in whatever, in the 1990s.
And in 2001, they bought like 46 .6 % with a $32 million purchase price of 10 cents.
I don't know if people know that, but that was done all very quietly and hush hush.
I don't know why, maybe it was because it was South Africans and it was Afrikaans people and NASA was that kind of company.
And it's being, you know, their assets are being traded on the Amsterdam stock exchange under process is the name of the company.
But, you know, this is not super unusual.
usual. It can be worked around.
I think the Chinese government has showed a certain amount of flexibility with foreign ownership within China.
And that was before all the laws were written back in 2001, like I said.
So I think they can certainly grapple with it here.
It's just more newsy now.
Nobody knew what Tencent was going to be back in 2001.
Yeah, let me put it this way.
And probably you can come up with some structure or solution or your idea that how ByteDance can, like you said, circumvent or meet the requirements of the regulators on both sides.
I know that may cost a lot for a company to have to provide such services for them, but maybe a brief idea, give us a brief idea.
How can ByteDance eventually solve this through some structure that you designed?
Yeah, there's a lot of tools.
I mean, not just me, but anybody who went to law school can sort it out.
But there are many tools available where, on paper, you're meeting the letter of the law, but not the spirit of the laws.
And we've seen this with a whole bunch of different things as well.
I mean, where people do workarounds, because the laws, policies and regulations, and you see it in China, and you've seen it in other jurisdictions as well, where they want to have foreign investment in areas that weren't open.
And so there would be workarounds where people would have Chinese enterprises holding whatever the shares, if it used to be to have a certain kind of company, you needed to have majority Chinese ownership and it had to be a joint venture.
And those rules kind of kept changing over the years.
So the same thing can be done with regards to operating in the United States lawfully.
I mean, Chinese companies, I mean, own some mega companies in the United States like Tyson.
Is it Tyson Foods? Or is it Purdue?
But they own a number of these enterprises, you know, that are American stalwarts, I mean, and columns of the society.
And that seems to to be going okay and they find a workaround to do that.
And I certainly think that this can be done in this particular instance with the proper legal advice.
So I think that if you look at it and you read in the media, ooh, wow, we've got to limit it to 20 % and that seems really impossible.
Again, just having a clever legal counsel or consultants to be able to help you work around the tax and the ownership perspective, that's not such a huge barrier as people might think that it is.
I mean, Mr. Murdoch had to become a US citizen to own his media stuff and he was the ultimate beneficial official owner, but I'm not sure that that would be the case in this particular instance.
And so I think that there are workarounds.
It costs money, like you said, for legal advisors or consultants to do it, but it's not the end of the world.
And certainly there's enough money in this thing, obviously, that would incentivize some consultant to be involved.
The Chat Lounge. The Chat Lounge unpacks views and opinions on hot issues in a more casual way.
Yeah, I understand.
Obviously, ByteDance will have a very powerful group of legal experts for this.
But maybe on the Chinese side, to Dr. Zhou, under what circumstances do you think China or Beijing would get the green light to the deal then?
I don't think that is what we really want just for the government because the law is there.
There, they have a lot of requirements for the companies.
If it is obviously against the laws or regulations, I don't think that the government will just make these transactions happen.
So it's unlikely the circumstances.
I think, as we have discussed, it must be one of the packages of the negotiations between these two governments or kind of discussions by the two sides.
Otherwise, I don't think the government will do it unilaterally to let it happen just according to the requirement of your asset.
And Professor Powell, what's your anticipation for the Chinese side?
Well, it seems to me that the evidence over the last three, four months is that Beijing is in no hurry to arrive at rushed agreements.
Everything's now on the table.
The Liberation Day tariffs were suspended two days after they were announced for all countries but China.
China didn't back down.
China actually responded with its own reciprocal increases in tariffs, which ultimately led to the temporary detente, which has enabled the discussions in Geneva and elsewhere to proceed.
But the pattern is that the folk on the Chinese side don't seem to be in any hurry whatsoever to arrive at agreements, particularly ones that involve excessive compromises and a dramatic dilution of national interest. This, of course, puts it at loggerheads with the position of the U .S. Congress and the political classes inside the Beltway in Washington, broadly speaking.
But I don't see, you know, in the 1980s, British Prime Minister Margaret Thatcher once said that this lady is not for turning.
And I get the sense that in 2025, Beijing is making it very, very clear that Beijing isn't for turning either.
either. And I would expect that there will be some difficult discussions yet to be had across the entire front of interactions between the United States and China.
And this just happens to be one of the most obvious issues on the table, but there won't be, in my own sense, any rush to conclude this transaction outside of the context of everything else.
Right. Maybe it's like what you said, Beijing is in no rush, but there is this deadline, right?
Even after President Trump extended this to September 17th.
That's in a little over two months time.
It's also the third extension since he returned to office.
So given the repeated delays, if the deal doesn't materialize this time before the deadline, Dr. Lehman, do you expect another extension or firm enforcement You know, I think another extension.
So, I mean, there's been, like you said, three extensions.
There were 75 days in January 2025.
Then there was another 75 days granted in April.
And now in June, there's another 90 days.
So, you know, cross this line, I'm going to punch you and knock this thing out.
Right. So it seems likely that there's going to be another extension would be my guess.
And I think, you know, China has got its agenda.
And I think that this administration, the Trump administration, has to follow the law, I mean, which is what the Supreme Court says, but those nine people can't get out and enforce the law.
Mr. Trump has to say to his U .S. attorney or somebody, go out and enforce this thing.
And so that's going to take some time.
I don't think he wants to, you know, estrange, he's got the, whatever, the by -elections coming up for his party.
And I don't think he wants to blow this thing up.
Like Professor Powell said, it's used not just for dancing and for social media, but but it's also used to get across some kind of political messages as well to a different group of people.
So I think we're going to look for another extension.
That would be my guess.
Theoretically, this can be pushed, you know, indefinitely.
Yeah. All right. You run into a problem, though, I mean, a political problem if you push it, which is the same thing can be said about Mr. Trump that was said about Mr. Biden.
You're not enforcing this, that, or the other thing that are on the books.
And you're picking and choosing as to what it is that you want your FBI to investigate or you want your U .S. Attorney's Office to investigate.
And now he's giving them a pass.
So is he soft on China?
Is that the kind of message you want in the run up to the mid elections?
Probably not. So nothing's going to happen to him if he doesn't, if he does extend it or to the executive department and the judiciary can't do much other than go through a series of litigations.
But yeah, it's more likely it'll be deferred and it's left up to people to try to sort out what to do with it.
But I think China China will hopefully be the net benefactor of what happens because it gives them a bit more time and flexibility.
And I also think it lays out the framework about what might happen in the future with other tech companies in China.
Indeed, that's what we are going to talk about now.
It's broader implications.
There's grown concern in China.
The U .S. move would set a precedent for targeting other Chinese tech firms overseas.
So, Dr. Zhou, how concerned are you?
well it's likely that you know these things will happen not only for tiktok so for us i don't think that we will change the laws or regulation of another country that easy my suggestion is that we can just try to have a better preparation of this mechanism and also follow the laws of the other countries but if the law is uh just about to discriminate chinese enterprises that is another story so i think that may be possible that we we consider about you know to improve the china's own regulations on export of the services and also our investment and trying to encourage the companies to diversify
their investment and trying to understand the different systems and mechanism to prepare for that and we are not trying to interfere with another country's laws laws and regulations.
So I think we can only try to do something based on ourselves and intentions and trying to encourage the companies to have more opportunities in different markets instead of just focusing on one basket.
Always behave like a real gentleman.
Professor Powell, what's your take?
Could this case become a model for other governments to pressure Chinese Zabs, perhaps prompting similar actions in countries like India or the European Union or other regions?
Look, this issue of technological competition is clearly one that is coming into frame and jurisdictions around the world will be looking to enhance their own abilities to protect the things that they believe matter most to them, such as digital governance and its autonomy, the extent to which nations or jurisdictions can achieve certain levels of data sovereignty, protecting individual private information, et cetera, et cetera.
Again, this one company, in some respects, is caught in the crossfire of multiple sets of concerns.
Some of those concerns, of course, I think are legitimate and they are concerns that are amplified across all countries, including China.
How different jurisdictions will look to this particular case as far as lessons to be learned, only time will tell.
And I say that that because it will depend on the outcome.
If, for example, ByteDance literally refuses to accede to attempts to strong arm it to sell, and ultimately, for example, because there's midterm elections coming up in November next year in the US, the administration no longer has the political capability to keep deferring this matter forever and the ban comes into effect, the question is, what judgment does other governments bring to bear on this issue?
is the judgment that a Chinese company, or a company actually that's majority owned by non -Chinese interests, ultimately stared down the American political system's attempt to strong arm it, because you will have a particular set of reactions as a result of that judgment.
If, however, your judgment is that this particular Chinese company is belligerent and refuses to be accommodating and negotiating good faith, then you might end up with a different set of approaches as a result.
So a bit's going to depend upon how this particular issue plays out, what the end outcome is, and ultimately also how the issues refract through the specific concerns in each location.
India is not the EU, the EU is not Africa, and they will each bring their own sensibilities to the table.
So no doubt there will be lessons drawn, but they won't be necessarily universal lessons that will function as a template.
You don't think we might be entering an era where every major digital platform must develop multi -sovereign versions to meet the demands of different national governments?
That's an unlikely scene?
What I meant was that each region will have its own particular take on the issues, so there won't be a single standard response.
I think, however, each region across the world is starting to show a greater sensibility, as you say, to the issues of digital sovereignty and a need to ensure that global technology solutions and systems do not override the local laws of the land.
Now, what's interesting about this is that if you recall, J .D.
Vance gave a number of speeches, including ones in Europe, where he in effect told the Europeans that Europeans should not have laws that would make life difficult for American big technology, and that American big big tech, really did have a right to transcend the jurisdictional requirements of particular regions and do what it wanted to do.
Is that the future that these places want?
Is that what the EU wants to see?
An environment where American big tech basically says, it's my way or the highway?
I suspect not. So the lesson coming out of all of this is likely to see national and regional sensibilities around data sovereignty reinforced, forced, but not necessarily in a way that closes up shop for the participation of global companies.
This is going to be a tricky area where we are going to aim for data interoperability, but at the same time, data sovereignty.
But I think from a technology point of view and a legal point of view, there are plenty of solutions that can square this particular circle.
Okay, if you say so.
Dr. Lehman, do you have a different opinion?
You know, I think they're going to have to thread the needle very carefully, because I mean, you've got, like I said, this Protecting Americans from Foreign Advisory, Adversary Controlled Applications Act, but that won by a lot, by 352 to 65 in the House and a vote of, what is it, 79 to 18 in the Senate.
it. So that people are looking at that.
And I think that if you, as Professor Powell said, if you look at the European Union, I think that they take data and privacy to a whole nother level.
The case that we're talking about, TikTok versus Garland, by the way, the defense was brought up as a First Amendment defense.
So the First Amendment to that constitution was about none other than free speech. You don't really have free speech in many parts of the world, even in the United Kingdom.
And someone saying something in the United Kingdom at the the Glastonbury Festival that's refused a visa to enter the United States can limit someone's freedom of speech, for example, somewhere else in the world.
So that was the context in which the case was brought to the Supreme Court.
So is that the template that will come forward in the future?
Hard to say. That was the template we saw with TikTok in the United States in the Supreme Court.
But with companies like WeChat or DJI, which is the drone outfit, you might look at it is something else.
WeChat might be the same, but it does a whole bunch of other things.
It's a payment place as well.
DJI is the drones. I mean, and that might have military applications.
So that might be different from the Supreme Court's ruling, which just dismissed, you know, the First Amendment challenges with regards to TikTok.
So is this a template?
If it is, it's kind of a messy one, but it's a signal that, like Professor Powell said, that each of these different jurisdictions is going to look at it differently and they're going to apply their rules and and policies and regulations as to privacy and data privacy and algorithm risks to their own particular jurisdictions.
Where they don't have them, like in third world countries or developing countries, then they're going to defer towards whatever the monolithic organization is, whether that would be the United States or China.
And then you're going to look at whether the stuff is useful or not useful for folks doing business in sub -Saharan Africa where maybe the laws, policies and regulations aren't as stringent as they might be in other parts of the world.
So it's hard to say.
But I do think it represents a signal as or a turning point or a pivot, although I agree with Professor Powell that this is not China making a turn, but it is a pivotal moment certainly for technology and whether this stuff is going to be adapted on a worldwide basis and whether it makes sense or not.
If we look at it in the past, it hasn't been that way.
I mean, Apple has had its restrictions in different parts of the world.
Google has. Some of these other social media platforms have had restrictions in different parts of the world.
And the applications are different.
You can see that even with multinational corporations.
For example, you don't have just a hyperbolic example would be McDonald's isn't serving beer in their establishments in the United States, but they do it in Europe.
And you're going to have with technology, just to draw a comparison, people are going to do different things with their laws and with the technology being permitted in their societies or jurisdictions.
And this just signals that it's going to be a little bit of a bumpy ride ahead.
Right. And last but not least, Dr. Zhou, do you expect China to adopt similar requirements for foreign apps operating inside its borders, especially those US ones?
Well, it's hard to say.
But in my understanding, China will try to improve our own idea or benefits of interest on different issues, including the national security.
So honestly in the previous several years, when we have the trade disputes with the United States China has changed or improved our laws and regulations accordingly.
And we put a lot of new requirements on the behaviors of the enterprises and a lot of activities.
So we know that artificial intelligence and also the digital economies are expanding the boundaries a lot.
out. So we are trying to follow the interest of China and also trying to improve the system.
So I think that our promises is always there.
We want to open our market wider and wider.
But in this regard I think that it's also natural for China to consider about our own benefits and interests especially when the time has changed, when their new practices by other governments has changed the competition scenarios.
So, this will be possible factors factors that will affect the decisions of the Chinese government on the different issues.
On that note, we've come to the end of our chat for this session.
Many thanks to Dr. Jomi, Deputy Director of the Institute of American and Oceania's Study, Chinese Academy of International Trade and Economic Cooperation, Edward Lehman, founder and managing director of China -based law firm Lehman Li and Xu, and Warwick Powell, adjunct professor, Queensland University of Technology in Australia for sharing your insights.
The show is available on all major podcast platforms. Please email us your comments at radio at cgtn .com.
I'm Ting Yun. Thank you for listening.
Join us again next week for more chat at the chat lounge.
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