China Morning Missive
So, a TikTok deal has been reached, or rather a “basic framework consensus” has been agreed upon whatever that might mean.
There are countless details still outstanding, but there are two items which need to be raised.
First, for China to agree some price would have had to been paid. There’s been nothing from either side. Knowing the importance of the social media platform to President Trump would indicate (at least to me) that the Chinese sought – and received – an item of equal value. I believe what was delivered was Taiwan.
What I mean, exactly, is that President Trump – at a minimum – will follow in the steps of President Clinton in 1998 with his “three no’s” statement. A full, and public, reaffirming of the One China policy. It could, however, be the case that China was able to extract more than just a public statement.
It is distinctly possible the parties agreed to, and will announce, a Forth Communique. That last time China and the United States formally recommitted to the One China policy was the 1982 Third Communique. Four decades plus is a long time and China is in a position to push for this sort of quid pro quo.
The focus is now on this Friday’s phone call and whether the two leaders announced a state visit to Beijing by President Trump later this month. It would be during that visit when any such public statement would be made, or new communique entered into.
The second item centers on the framework of the deal itself. To start, China’s trade negotiator stated in local media that the parties would “negotiate the details of the outcome document”. For those who’ve conducted any commercial operations in China, you’ll know that this means no final deal has been concluded. Far from it. Positive progress, for sure, but no deal.
Reviewing local media accounts also finds that the deal structure isn’t a sale. Again, China’s trade negotiator stated that TikTok would be “licensing its intellectual property including algorithms.” It is a licensing agreement and not a clean sale.
This was followed by comments from the Deputy Director of the Cyberspace Administration of China stating, “resolving the TikTok issue through the outsourcing operations of TikTok’s US user data and content security operations.” The operative word here is “outsourcing”.
Tying all these details together would then point to the establishment of an American corporate structure which controls US data and the domestic operations, but where Bytedance licenses the entire backend to that American entity. Critical, it doesn’t appear all that clear which corporate entity will control the algorithm for the US platform.
There’s also the financing dynamics to take into account for whatever deal is reached. Bytedance remains 60% owned by foreign investors and I’d expect a corporate reorg of some sort. Those details, however, are easier to iron out and – frankly – far less interesting.
For now, and I’ll repeat, it all just comes down to the Trump/Xi call set for the end of this week.
Bloomberg.com
US, China Reach TikTok ‘Consensus,’ Setting Up Trump-Xi Call
President Donald Trump said he would speak with Chinese leader Xi Jinping on Friday as US and Chinese officials reached a framework deal on keeping...
