Today the White House issued two executive orders to block two Chinese Internet companies. The two administrative bans for “national security reasons” are behind the US government’s pressure on the upgrading of Chinese companies, and the ultimate goal is to suppress the internationalization of Chinese Internet companies .
Emergency state again
The first ban is for Bytedance, which prohibits US companies and individuals from conducting any transactions with Bytedance after 45 days. The second ban is aimed at Tencent WeChat. After 45 days, US companies and individuals are prohibited from having any transactions related to Tencent’s WeChat business. The two bans are actually not surprising, but the boots finally landed, because the US Secretary of State Pompio has announced many times that TikTok and WeChat will be blocked. The reason for the blocking is that Chinese companies may collect US user data and threaten the national security of the United States. .
Both bans were implemented through the president’s declaration of a state of emergency. After 9/11, the U.S. Congress passed the Patriot Act, which gave the president great executive power to take emergency measures against foreign companies’ assets in the U.S. without the need to provide evidence, as long as the president felt threatened. Act decisively.
In other words, whoever feels threatened by the White House can block its assets in the United States. This is in line with US law. Even if the suppressed sue the federal government in the United States, that would be meaningless. In March 2019, Trump also completely kicked Huawei out of the US market by declaring a “state of emergency”. Huawei subsequently announced a lawsuit, but was dismissed by a federal judge as “the government has the right to do so.”
U.S. netizens commented ironically on Twitter that nearly 160,000 people in the United States have died in the new crown epidemic. The president has not declared a state of emergency, but in order to suppress two Chinese Internet companies, he has simply activated the “state of emergency”. ByteDance and Tencent have enjoyed the treatment of Huawei before.
Back to the ban itself. The first ban has two meanings. The shallow meaning is to force Byte to sell TikTok US before September 15th, otherwise it will take measures to block Byte. Byte and Microsoft are gradually advancing sales negotiations. The White House is now using an executive order to once again urge Byte and Microsoft to quickly reach an agreement. But the deep meaning is to further pressure byte to sell TikTok’s global business.
The level of suppression continues to increase
This is actually the ban that Trump claimed to be issued last Saturday. Last Friday, Trump claimed on the plane returning from Florida to Washington that he would issue an emergency order on Saturday to completely block TikTok and prohibit American companies from acquiring TikTok. He also emphasized that he has every right to do so. But Trump went to the golf course the next day and did not issue a ban as scheduled.
Of course, this is not because he changed his mind or forgot to play, it was originally a means of pressure. After the president clearly announced that TikTok would be blocked, Byte and Microsoft suspended sales negotiations. After Microsoft CEO Nadella spoke with Trump in person on Sunday, Trump announced his approval of the transaction on Monday. What the two parties specifically discussed, only the parties know.
However, the terms of the negotiations between Byte and Microsoft have changed: Byte must sell all of TikTok’s shares in the United States and cannot retain any equity. Byte’s US investors can retain a minority stake in TikTok’s US; Microsoft wants to acquire Canada in addition to TikTok’s US business. , Australia and New Zealand business; Microsoft must pay a large facilitation fee to the US Treasury.
Trump proudly said on Monday that there would be no such deal without the U.S. government, so he must give Key Money (the rent paid to the landlord by renters in the real estate industry). Microsoft’s statement is intriguing: it was after the White House forced TikTok to sell, that Microsoft approached Byte. The implication is that Microsoft is just a takeover, not a robbery.
But what is even more shocking is that Trump also stated very nakedly on Monday that he felt that selling only 30% was too troublesome and suggested that Microsoft swallow up the entire TikTok global business. Just today, the British “Financial Times” released news that Microsoft felt that it could not acquire TikTok’s four market businesses alone, and could not separate its services from other markets around the world, and planned to acquire TikTok’s global business in its entirety.
Today’s administrative ban also exposed the true intentions. If the United States wants to force ByteDance to sell TikTok’s US business, it can directly use CFIUS to exert pressure, because this is the jurisdiction of CFIUS. In order to avoid greater business losses, Byte finally agreed to sell TikTok’s US business. But now the US government is threatening to block bytes with executive orders, apparently with the intention to swallow TikTok’s global business.
This has touched the bottom line of fair competition in the global economy. In the past few years, ByteDance has invested huge resources in its international business. It is impossible to surrender to American companies under the pressure of the US government.
Byte announces public protest
ByteDance subsequently issued a statement with strong measures, and the target of the protest was directed at the President of the United States. “The new executive order issued by the President of the United States did not follow due process of law. We are very shocked by this…. The US government disregarded the facts, did not follow due process of law, decided on the terms of resolution without authorization, and even tried to interfere in negotiations between private companies… …If the U.S. government cannot treat us fairly, we will put it in the U.S. courts.”
Forced to sell TikTok’s US business because the US government has direct jurisdiction, it is really helpless. But TikTok still has hundreds of millions of users in Latin America, the Middle East, Asia, and Europe. The US government has no jurisdiction, let alone the right to force ByteDance to sell. ByteDance has every reasonable reason to resist this unreasonable request of the US government.
After the U.S. government instructed the Committee on Foreign Investment (CFIUS) to investigate TikTok at the end of last year, ByteDance has been actively cooperating with the investigation and announced the audit policy and algorithm source code, hoping to prove that TikTok has not abused U.S. user data and will not report to China. The government provides user data.
Byte’s efforts may be futile, because the ultimate goal of the US government investigation is to force TikTok to sell. Just a few months ago, Byte’s US institutional investors urged Zhang Yiming to sell a majority stake in TikTok. After all, the change of controlling rights has no loss to American investors, and they are more worried that TikTok will be blocked and affect their investment returns. However, Zhang Yiming refused to let go of TikTok’s control of the United States, and remained deadlocked.
It wasn’t until July that CFIUS threatened to ban it, and all the suppression fell and accelerated, and Zhang Yiming finally chose to sell the majority stake, but hoped to retain the minority stake in TikTok America. At the time, U.S. Treasury Secretary Mnuchin (CFIUS chairman) thought it was acceptable. After Byte agreed to sell TikTok’s US business, it first talked with a consortium of American funds, and then Microsoft came to negotiate a purchase after hearing the news. TikTok’s chief legal counsel used to work at Microsoft for 25 years, and has been working friends with the president of Microsoft for many years.
When the three parties have reached an agreement on this plan, the president has also spoken to completely block TikTok, in order to pressure Byte to give up all of TikTok’s US equity, and no equity can be retained; and not only the US business, but also Australia, New Zealand and Canada. Also sold. Byte and Microsoft are still negotiating. Trump publicly suggested that Microsoft directly swallow TikTok’s global business. This is obviously unacceptable for Bytedance.
What does the US want Tencent?
The same logic applies to the second ban. The news that the United States may block WeChat has been circulating for almost a month. But the ban itself does not directly block WeChat, but blocks all WeChat-related transactions. The White House instructs the U.S. Department of Commerce to specify which transactions are blocked, which means that the right of interpretation belongs to the U.S. government.
With the 45-day banning decision time, the situation may undergo many changes. With the current style of the US government, it is really unclear what will happen by then. It is difficult to say whether the United States will completely block WeChat, such as removing WeChat from the Google Apple Store, or forcing WeChat to voluntarily abandon its US business.
What does the White House want? Does WeChat want to withdraw from the US market? It’s like putting pressure on byte beating, I think it’s more than that. Unlike TikTok, which has tens of millions of monthly active users in the United States, WeChat is actually limited to the American Chinese market in the United States, which does not affect the data security of mainstream US Internet users. The White House’s ban on WeChat is more like a means of pressure, just like the previous federal government’s continuous pressure on byte.
What does Tencent interest in the United States? Obviously, it is not Tencent’s own Chinese American social app WeChat, but Tencent’s huge investment portfolio covering the world, especially investment assets in the United States. At the beginning of this year, Tencent President Liu Chiping introduced that Tencent has invested in more than 800 companies, of which more than 70 have been listed, more than 160 have become unicorns, 6 companies have created an investment return of US$5 billion, and one company has created an investment return of more than 10 billion. Dollar.
In the US market alone, Tencent has invested in more than a dozen companies such as Tesla, Snapchat, Activision Blizzard, Glu Mobile, etc., and established an investment matrix in the US. These very attractive assets may be the ultimate goal of the United States. They do not want to see Tencent get so deeply involved in the US Internet and gaming industry. I am actually more worried that Tencent will abandon the WeChat US market in order to preserve its investment assets, just like what happened in the Indian market.
Afterword
With the continuous escalation of the US government’s suppression of Bytedance, its demands have become more and more excessive, and the position of Bytedance has begun to shift from rational retreat to public protest. Regardless of the outcome of the struggle, Byte’s attitude is very clear: global business and US business are two different things, and TikTok’s global business will never be easily abandoned. In the past two years, the US government has used “states of emergency” three times to administratively block Chinese technology companies, and has continued to increase pressure and sanctions, which in itself illustrates the success of these three Chinese technology companies in their internationalization.
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