No ice bucket challenge on social media could be quite as chilling to Chinese tech entrepreneurs as news from the White House. The Biden administration is backing a bi-partisan bill that could curb foreign apps. The legislation is largely aimed at TikTok, the short videos website.
The move poses a danger to the valuations of TikTok’s parent ByteDance and a slew of other Chinese tech groups.
The legislation would allow the US to take action against foreign-linked electronics or software businesses deemed to pose a threat to national security. The obvious target is the wildly popular TikTok app. US officials fear that Chinese authorities could access its troves of personal data.
The legislation, judging from drafts, could reach far beyond TikTok. It may encompass businesses active in other forms of social media, artificial intelligence, fintech, quantum computing and ecommerce.
Chinese-controlled tech groups have been racing for foreign market share. Alibaba’s shopping and payment apps, PDD’s shopping platform Temu and the fast-fashion retailer Shein are just a few of the businesses thriving overseas.
Much will depend on how politicians and lawyers define “foreign-linked” and “national security risks”.
If the US bans TikTok, ByteDance would lose one of its largest revenue sources. Estimated sales last year of $10bn depended heavily on the popularity of the website with young Americans. More than two-thirds of US teenagers use TikTok. It has become a key platform for advertisers to reach people under the age of 34.
ByteDance also operates Douyin, a Chinese version of TikTok in China. This cannot rival the growth potential of its stablemate. Douyin has 700mn daily active users, compared with more than 1bn active monthly users of TikTok outside China. Douyin is up against bigger rivals in nearly all the services it offers, including short videos, livestreaming, ecommerce and even food delivery.
A US ban on TikTok would make it harder for ByteDance to list in Hong Kong as it aspires to do. The notional valuation of the private group would, meanwhile, fall. It has already dropped from a vertiginous $460bn in 2021 to some $300bn last September. The market values of peers Alibaba and Tencent have also been in retreat.
Joe Biden is as intent on pulling apart the technological ties between the US and China as Donald Trump was. Showbiz razzamatazz is no longer part of the package. But the intention is just the same.