Recently, the Ministry of Commerce and the Ministry of Science and Technology of China adjusted and released the “Catalogue of China’s Export Prohibited and Restricted Technologies” (the “Catalogue”), which is accused of possibly affecting TikTok transactions.
In the “Catalog”, the algorithm considered as the core of TikTok is named and may be banned from export. For example, the newly added Article 21 on “Personalized Information Push Service Technology Based on Data Analysis” and Article 18 on “Artificial Intelligence Interactive Interface Technology” involve TikTok technology.
ByteDance responded on the 30th and stated that it will strictly abide by the relevant regulations and catalogs and handle related businesses related to technology export.
A follow-up report from Xinhua Viewpoint pointed out that Bytedance’s international business can achieve rapid development, relying on its strong domestic technical support. It is recommended that Bytedance carefully study the adjusted catalog, and seriously and carefully consider whether it is necessary to suspend related transactions. Substantive negotiations.
This means that TikTok will have to finalize the sale plan information or be forced to adjust it within 48 hours. This big deal that is about to be concluded is likely to be stranded.
Variables in TikTok
On August 27, the media reported that the sale of TikTok’s business in North America, Australia and New Zealand by ByteDance may be concluded within the next 48 hours. The size of the transaction may be between US$20 billion and US$30 billion, and the final buyer may be Microsoft, Oracle or Wal-Mart.
However, what TikTok waited for was not an acquisition agreement, but an expedited adjustment of the Catalogue by the Ministry of Commerce.
Obviously, TikTok fully meets the standards of “Personalized Information Push Service Technology Based on Data Analysis” . If ByteDance wants to sell TikTok’s business in the United States, it must be approved by the Chinese government if it comes with cutting-edge technologies in related fields such as artificial intelligence.
The TikTok algorithm was named, which means that its sales plan will face greater variables. It can be seen that this transaction is not an ordinary company acquisition transaction, but a transaction related to the transfer of core technology.
Algorithms are the core of TikTok and the foundation of ByteDance’s multiple business lines . As we all know, Bytedance started with the “personalized recommendation algorithm” of Toutiao. Whether it is the follow-up domestic TikTok or the overseas TikTok, the core competitiveness is the personalized recommendation algorithm.
According to industry insiders, the complexity of byte recommendation system level is mainly in engineering, not in algorithm structure. It supports “refined operation” in engineering, and the performance of algorithm is not all due to the credit of engineering architecture, more important. It is the feeding of data. In short, TikTok’s algorithms and models rely on the feeding of hundreds of millions of domestic users.
There is no doubt that this change has added more uncertainty to TikTok’s future development. This case shocked the Internet industry that the acquisition is likely to be rejected at the government level. The long plot surrounding TikTok, the US government, Zhang Yiming, ByteDance, and Microsoft may end because of this.
Zhang Yiming does not advocate selling TikTok. On August 24th, local time in the United States, TikTok formally filed a lawsuit against the Trump administration. Although the probability of winning the lawsuit is ugly, this behavior is regarded as Zhang Yiming finally “standing up” and being tough.
After the TikTok ban, Zhang Yiming’s attitude to the outside world was somewhat unpredictable, but it cannot be denied that his idea of retaining TikTok’s business in the United States and maintaining the integrity of its global business is beyond doubt.
According to LatePost reports, under the heavy pressure of the Trump administration, ByteDance’s board of directors had major disagreements. “Zhang Yiming differs from American investors in handling TikTok’s US business. Recent board meetings have happened. discuss aggressively.”
In fact, as early as 2019, shareholders proposed to Zhang Yiming to split TikTok, but this proposal was rejected by Zhang Yiming.
TikTok has become another Sino-US game tool after Huawei. Behind its sales turmoil is the contest between China and the US in the high-tech field. Before TikTok sued the US government, Trump signed executive orders twice to put pressure on TikTok and its parent company Bytedance. Zhang Yiming didn’t want to sell at all, and he also fought many times internally.
At this time, the Chinese government introduced technology export restrictions, to some extent, it was conducive to byte bounce to delay transactions.
Objectively speaking, this policy is a protection for byte bounce. According to the previous rhythm, if you really follow the selling procedure, ByteDance may not get the money, and there is also the risk of losing popular support in China, and the gain is not worth the loss. Now the country has set up relevant procedures, giving ByteDance a new excuse to negotiate related transactions.
In the most extreme case, if TikTok is finally forced to obtain a very unfavorable selling condition, the transaction may not be approved in China. Even if it is sold, there are only user information and video content, and the transaction value will be greatly reduced.
Covet TikTok, what’s your intention?
Two days ago, Trump issued an ultimatum: Microsoft or other US companies must acquire TikTok before September 15. This behavior triggered a number of US companies bidding.
Previously, many American giants coveted TikTok, and the intention behind it was obvious. They took a fancy to TikTok’s user value and growth potential. The rumors of buying TikTok can always easily stimulate stock price changes.
On the evening of August 27th, Beijing time, Microsoft’s stock price suddenly soared nearly 4%, and its market value exceeded US$1.7 trillion in one fell swoop, which is equivalent to more than 11 trillion yuan for the people. According to foreign media sources, the change in Microsoft’s stock price may be stimulated by rumors of the acquisition of TikTok. According to CNBC, the transaction may appear in the next 48 hours or so.
According to CNBC insiders, TikTok is about to reach an agreement to sell its US business, and may announce a deal in the next few days, and is still discussing the bids of Oracle, Microsoft and a third US company. People familiar with the matter indicated that TikTok may sell its businesses in the United States, Canada, Australia and New Zealand at a valuation of between US$20 billion and US$30 billion, but the price has not yet been determined.
Before the announcement of the above news, the trend of US stocks, especially the Nasdaq, was relatively weak. But after the news was announced, Microsoft’s strong performance drove the Nasdaq to strengthen, and the three major stock indexes turned red across the board.
This is not the first time that an American giant has increased its popularity with TikTok. Lieyun.com sorted out several companies that participated in the bidding, and it can be seen that bidding rumors have a direct impact on stock prices.
The word benefit is the main reason why TikTok is coveted.
Regarding the future development of TikTok, all American capital who wants to benefit from it wants to maximize their own interests through the pressure on TikTok by the US government. There are two ways to maximize their interests.
The first is to force TikTok to accept a sale price, so as to realize the realization of investment. For capital, the interest in premium far exceeds the interest in operating a company and building it into a global enterprise.
Second, for players who have no chance to enter relevant markets and fields, including giants such as Microsoft, Oracle, and the legendary Wal-Mart, they want to minimize or even eliminate the connection between TikTok and China, so as to use the power of capital to turn TikTok’s business into their own Have.
How will the fate of TikTok America end?
What substantive impact will the publication of the “Catalog” have on technology and products?
First, the technology transactions involved need to be approved by the government. The export of restricted technology requires a technology export license issued by the government, which means that enterprises no longer have the right to decide on the export of restricted technology, and transactions involving technology need to look at the opinions of the government. Obviously, TikTok has lost trading autonomy after the launch of the “Catalog”.
Second, circumventing government approval to conduct private transactions will face huge fines. The “Technology Import and Export Management Regulations” stipulate that for unauthorized import or export of technology that is restricted to import and export, the illegal income shall be confiscated and a fine of 1 to 5 times the illegal income shall be imposed. If TikTok trades directly in violation of the regulations, it will face a fine of a minimum of 20 billion U.S. dollars and a maximum of 100 billion U.S. dollars, and may directly declare the byte sentence to death.
Source: Image provided by the company
In fact, updating the technology export restriction list is a common practice in developed countries such as the United States, and technologically advanced developed countries frequently update their own lists to reflect the reality of the development of new technologies. The Trump administration has repeatedly revised the entity list and increased restrictions on the export of AI software technology.
Cui Fan, a professor at China University of International Business and Economics, said that Bytedance’s international business can achieve rapid development, relying on its strong domestic technical support. It continuously provides the latest core algorithm services to overseas companies, which is a typical example. Export of technical services.
According to Professor Cui Fan, since my country revised the catalog in 2008, great changes have taken place in the international social environment and many breakthroughs have been made in emerging technologies such as artificial intelligence. It is of little significance to continue prohibiting or restricting some technologies. At the same time, some new technologies continue to emerge. It is necessary to adjust the relevant catalogue according to the objective needs of the development of the situation. This adjustment has been brewing for a long time.
He suggested that Bytedance seriously study the adjusted catalog, seriously and carefully consider whether it is necessary to suspend the substantive negotiations of related transactions, perform the statutory declaration procedures, and then take further actions according to the situation.
Professor Shen Yi from the Department of International Politics of Fudan University said that in the game surrounding TikTok, the “Catalogue” marked the official entry of the Chinese government. This also reminds Chinese companies going overseas to enhance their ability to identify and control risks when operating overseas, including the ability to effectively counteract and manage risks when faced with risks.
Then can TikTok continue to negotiate with the US government and companies such as Microsoft?
Based on the new catalogue adjustment, if the international business is to continue to operate smoothly, no matter who the new owner and operator are, the sale of the US business requires the Chinese government’s permission to apply.
At present, there are two ways in front of ByteDance. One is to shut down the US company, and the other is to sell the US company but divest the core technology. However, TikTok, which stripped the core technology, is estimated to have difficulty finding a buyer.
Following the relevant policies and regulations of the Ministry of Commerce may be the best choice for Bytedance. TikTok’s future is still uncertain, as for its fate, we can only wait and see.
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