Chinese State Firm Claims Stake in TikTok’s Sibling Company

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ByteDance headquarters, parent company of social influencing app TikTok, is seen in Beijing on September 16, 2020. Whistleblowers from TikTok’s U.S. offices told CNBC not only are they made to work double shifts for ByteDance on Beijing time, but China has access to all U.S. user data and uses the privilege readily.
ByteDance headquarters, parent company of social influencing app TikTok, is seen in Beijing on September 16, 2020. Whistleblowers from TikTok’s U.S. offices told CNBC not only are they made to work double shifts for ByteDance on Beijing time, but China has access to all U.S. user data and uses the privilege readily. (Image: GREG BAKER/AFP via Getty Images)

In April, ByteDance, which owns TikTok, sold a one percent stake in its subsidiary company Beijing ByteDance Technology Co. to a state-backed firm WangTouZhongWen (Beijing) Technology. The government-backed firm was also given a board seat in ByteDance’s subsidiary. The move raises concerns about how much the Chinese regime plans to interfere in the country’s private tech sector.

WangTouZhongWen is owned by three state-owned entities, one of which has ties to a fund backed by the country’s internet regulator Cyberspace Administration of China (CAC). ByteDance claimed that the subsidiary in which Beijing has taken a one percent stake does not own TikTok. WangTouZhongWe also has no stake in ByteDance which is incorporated in the Cayman Islands.

The subsidiary company “relates to some of ByteDance’s China-market video and information platforms, and holds some of the licenses they require to operate under local law,” AP reported. The Chinese version of TikTok is called Douyin.

Beijing has also invested in Weibo, the Twitter alternative in China. In April, WangTouTongDa, owned by China Internet Investment Fund (CIIF), took a one percent stake in Weibo’s subsidiary, Beijing Weimeng Technology Co., Ltd, or Weimeng. CIIF was established by the CAC and finance ministry back in 2016. WangTouTongDa has also received the right to appoint a member to Weimeng’s three-member board. 

Though the Chinese regime has previously taken stakes in other companies, the fact that it has done so amidst an ongoing tech crackdown has raised eyebrows. According to Paul Haswell, partner at law firm Pinsent Masons, Beijing’s decision to own shares in tech firms is motivated by the fact that the CCP is concerned about private technology companies gaining too much data and power. As such, the Chinese regime is attempting to rein in these companies and gain control over them. 

“This practice is likely to continue, with the government taking greater stakes and exerting more control, essentially turning many of these tech companies into SOE (state enterprise)-lite type entities,” Haswell said to Reuters.

Matt Perault, director of Duke University’s Center on Science & Technology Policy, doesn’t think the Chinese government’s stakes in the ByteDance subsidiary would change America’s national security assessment about TikTok. However, he did acknowledge that the security risk posed by TikTok has been a concern for both Republicans and Democrats

“Scrutiny and skepticism about Chinese firms operating in the U.S. is a bipartisan issue, and both parties seem to be climbing over each other to demonstrate who can take a harder line on China,” Perault said to The Washington Post

A person familiar with the situation told the media outlet that Beijing’s acquisition of ByteDance’s subsidiary was related to a new regulation regarding video and information sharing platforms inside China. The regulation could make the Chinese government secure similar stakes in other major social media companies in the country.

In August last year, internal documents accessed by The Epoch Times had shown that ByteDance had more than 130 CCP members working in the company. Many of them were engaged in management positions.

Tiktok in the US

The Trump administration had tried to ban TikTok in the United States last year. However, the attempt was unsuccessful. Earlier this year, the Biden administration dropped Washington’s attempt to get the app banned. Committee on Foreign Investment in the United States (CIFUS) is presently conducting a national security review of TikTok.

Meanwhile, Republican Senator Marco Rubio from Florida has asked the White House to block TikTok, citing Beijing’s new stake in ByteDance’s subsidiary as well as the board seat. He pointed to India’s decision of banning TikTok last year and insisted that “it is past time” America took similar action against the app. The senator also wants the government to set up a framework of standards that high-risk foreign apps must meet before they are allowed on American communication networks and devices.

“The Biden Administration can no longer pretend that TikTok is not beholden to the Chinese Communist Party… Even before today, it was clear that TikTok represented a serious threat to personal privacy and U.S. national security. Beijing’s aggressiveness makes clear that the regime sees TikTok as an extension of the party-state, and the U.S. needs to treat it that way,” Rubio said in a statement.

TikTok recently faced public backlash in the United States after it came to light that the company had banned a video that showed Cuban citizens protesting against the country’s communist regime.

  • Arvind is a recluse who prefers staying far away from the limelight as possible. Be that as it may, he keeps a close eye on what's happening and reports on it to keep people rightly informed.