TikTok founder defends potential Microsoft sale


Zhang Yiming Image copyright Reuters
Image caption Zhang Yiming

The Chinese head of TikTok has defended plans to sell its US operations, describing a deal as the only way to prevent the app from being banned in the US.

In a letter to Chinese staff, Zhang Yiming said the critics do not see the “full context”.

The letter comes as US President Donald Trump has threatened to bar the social media company.

Chinese state media have said such pressure amounts to “theft”.

On social media, Zhang Yiming, founder of TikTok’s Chinese parent company ByteDance, has also been described as a “traitor”.

In the letter to staff, which was shared by the company, he acknowledged the criticism, but said “many people misunderstand the current, complex situation”.

He reminded staff of the firm’s global ambitions and noted a rise in anti-Chinese sentiment around the world, including in the US and India.

“As a company, we have to abide by the laws of the markets where we operate,” he said. “It feels like the goal was not necessarily a forced sale, but given the current macro situation, a ban or even more.”

‘Mafia-like behaviour’

The Trump administration has threatened to ban TikTok, saying the data it collects from its users – including an estimated 100 million in the US – is at risk of exploitation by the Chinese government.

Beijing and TikTok deny those claims, which the US has made against other Chinese tech firms. But a sale to a US company is seen as a way to alleviate such concerns.

On Sunday, Microsoft confirmed it was in discussions with ByteDance over buying TikTok’s operations in the US, Canada, Australia, and New Zealand – countries that make up four of the Five Eyes intelligence alliance.

On Tuesday, it was reported that Apple is also interested.

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Media captionWill TikTok be banned?

Trump turnaround

When reports of talks between ByteDance – which has received backing from US investors – and Microsoft surfaced on Friday, Mr Trump said he opposed the deal.

But he later appeared to okay a potential sale, saying the government – which would review any takeover by a US company for national security risks – should receive a “substantial” cut of any purchase price. Mr Trump has threatened to ban the app on 15 September if there is no deal.

“The United States should get a very large percentage of that price, because we’re making it possible,” Mr Trump said.

Such a demand is highly unorthodox.

Nicholas Klein, a lawyer at DLA Piper, said generally “the government doesn’t have the authority to take a cut of a private deal through” the Committee on Foreign Investment in the United States, which is the inter-agency committee that reviews some foreign investments in the US.

Charlotte Jee, a reporter at MIT Technology Review, a magazine owned by Massachusetts Institute of Technology, said Mr Trump’s comments were “pretty astonishing”.

Speaking to the BBC’s Today programme, she said: “I hate to say this but it is kind of almost Mafia-like behaviour – threatening a ban which pushes down the price then saying ‘oh we should get a cut of that deal afterwards to say thank you for what we’ve done there’.

“It is extraordinary behaviour as well because last week we had lawmakers in the US trying to look at whether tech companies are too big and now we’ve got Trump trying to make one of them even bigger so it is a really, really bizarre situation to be in.”

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Media captionWhat is TikTok?

Analysis

By Dearbail Jordan, business correspondent

Former FBI director James Comey once said that dealing with Donald Trump gave him “flashbacks to my earlier career as a prosecutor against the Mob”.

The US president has certainly made TikTok an offer it can’t refuse.

If the video app doesn’t break away from its Chinese owner, ByteDance, and sell its US operation to Microsoft, Mr Trump will simply ban it – putting TikTok’s access to its 80 million active American users in jeopardy.

Mr Trump has already flexed his muscles against other Chinese firms, such as Huawei.

But what makes the situation with TikTok unprecedented is the demand for a cut of the sale price. The US Treasury has not explained how this extraordinary demand for a cut of a private transaction would work.

Mr Trump reckons the government should get a big slice of the pie because “we’re making it possible”.

However, the deal wouldn’t be happening in the first place but for his administration’s claim that the likes of TikTok are feeding users’ data directly to the Chinese Communist Party.

Beneath the president’s bombast, perhaps this is simply payback for the US and its companies, some of whom claim China has stolen intellectual property from them.

Perhaps Mr Trump is just doing outwardly what some governments have been doing for years.

But one thing is certain, Mr Trump’s demand for payment has muddied the waters in an already fraught situation.