Banning TikTok: A 'China Crusade' has begun?

United States Secretary of State Mike Pompeo publicly claimed in the media that Chinese softwares such as TikTok may share the private information and data of its users with the Chinese government, and thus poses a "threat" to US national security. Some American analysts have also raised concerns about the Chinese government's possible political interference through social media apps such as TikTok.

While these concerns are valid in today's digital world, the US government could have adopted many intermediate steps to work with TikTok over data privacy and potential political interferences, instead of banning the app or forcing its sale. For example, it can urge ByteDance, which owns TikTok, to work with US regulators and stakeholders to improve its practices over data storage, security and user privacy. It may even require TikTok and its investors to work out a deal with ByteDance so that the company can become a completely independent corporate entity not subject to the policy and will of the parental organisation.

However, by taking a smash-and-grab approach, the White House seems to send out a strong message that TikTok as a company with Chinese roots is not a legitimate player in the US. Even if TikTok can avoid being shut down or acquired, the damage has already been done and the company's operational prospects in the US (and many other countries) are dim.

The US government has not shown convincing evidence that TikTok has done anything illegal or intervened in US domestic politics on behalf of the Chinese government. One has to wonder whether the curb is a revenge against what K-Poppers and TikTok Kids did to the Tulsa rally tickets or a general message of aggression towards anything of Chinese origin.

Although many governments have taken direct measures to intervene information flow and even firm operations in the digital economy, a direct ban of an app is a rare case. Could there be an aim to curb China's efforts to grow its technology and globally-competitive companies?

If history has taught us a lesson, the Thucydides Trap is hard to escape. When a rising power imposes threats - real or perceived - to the predominant or ruling party, geopolitical tensions are likely to erupt. No matter what happens to the US in the current pandemic and to what extent it would be rocked by social and economic disparities, the role of the US in the global system shall not be underestimated. Given the dynamics of domestic politics in the two nations, the tension in Sino-US relations will not disappear anytime soon. This is a very special moment for Chinese enterprises like TikTok.

Domestic and international mediators for this situation seem to be absent at this moment of history. It is also unclear when and to what extent the rational voices from Singapore's Prime Minister Lee Hsien Loong or German Chancellor Angela Merkel would be heard by both Beijing and Washington. If the current US-China rifts continue, for countries that perceive China as an aggressive regime advocating a value system that is incompatible with their own, they would start to scrutinise Chinese firms that "might" be used by the Chinese government as a leverage, however broadly defined. For hawkish politicians, "Red China" could be a very useful tool to rally support. Unless the geopolitical rifts improve, we should not be surprised to see more and more politicians joining the bandwagon of a "China Crusade".

For global platform companies with access to millions of users' information that can be interpreted as "sensitive", how global operations and cross-border business integrations can be maintained is becoming a "billion-dollar question" in the existing political environment. TikTok's current dilemma is a warning to all companies, wherever they are, about political liability where economic and national security concerns can be painted in bold brush.

From a technical perspective, operating globally is the most efficient way to run a platform company featured with strong network effects. However, high-tech companies from China such as TikTok may have to restructure themselves and promote localised operations in "sensitive" regions. Or put it another way, they have to calibrate their level of political risks across countries and consider to run themselves as multiple region-centered entities rather than a truly globalised entity. In the short term, many Chinese companies have to curtail their global ambitions to smaller plans of regional expansion.

At the same time, data-intensive companies, especially those from emerging markets, must learn to work closely with lawyers, politicians, and lobbyists to understand their "user agreements" to ensure that their data policies (including all data storage, processing, and sharing) and the behaviours of third parties operating on their platform would not raise political flags.

TikTok's personnel adjustments shows that ByteDance is seriously thinking about the political risks it faces, but hiring reputable people to take on key global positions is far from sufficient to dissuade those with political motives from playing the China card.

Along with setting up independent legal entities overseas whose operations are not controlled by the parent firm, these companies may consider taking the initiative to "handcuff" themselves by allowing active monitoring and even handing over the data management to reputable third-party organisations to show their commitment to data security and user privacy.

Some practices like these will inevitably be criticised as "soft knees" by extreme nationalists back in the home country. However, entrepreneurs with a global vision have to think beyond zero-sum games in order to deal with the complexity of operating firms in a deeply interdependent yet increasingly fragmented global society. A win-win mindset armed with knowledge regarding how to play the games according to widely-accepted rules may still be the best long-term approach.

Geopolitical issues will be the biggest challenge facing the internationalisation of Chinese companies, which will greatly affect the timing and market for companies to choose for overseas expansions.

The increasing politicisation of business activities will also have a negative impact on other aspects of the business such as the recruitment of managerial and technical talents, the acquisition and access to user information that is key to product design and commercialisation, and the formation of strategic partners that possesses key complementary assets.

In an open and friendly international environment, people tend to give their business partners the benefit of the doubt without considering the worst political implications their economic transactions may result in. However, when international relations become tense and hostile, geopolitics will become an overriding consideration in business decisions.

Following Huawei and TikTok, there may be other Chinese technology companies that will be subjected to strict scrutiny or sanctions overseas for "security issues." Although companies do not necessarily carry out a political mission in international expansion, geo- and domestic politics among the major powers inevitably shape the strategy and fate of individual companies. In an increasingly politicised world, there might be no room for even the most innocent souls to remain apolitical.

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