Donald Trump’s extension for deciding TikTok’s future in the US is valid until early April, leaving limited time for negotiations. The key issue is establishing an ownership structure for TikTok’s US business that satisfies both American authorities and the Chinese side. However, China is unwilling to fully relinquish control.
Ownership Challenges and Legal Barriers
According to the Nikkei Asian Review, US law prohibits representatives of hostile states from owning more than 20% of platforms that exert significant influence, such as TikTok. Currently, ByteDance’s capital structure includes 20% held by management, another 20% by employees, and the remaining 60% by institutional investors, most of whom are based outside China. This structure gives US authorities the legal right to demand changes in TikTok’s ownership within US jurisdiction.
While TikTok and ByteDance oppose selling the American business entirely, they have proposed increasing American investors’ stakes while maintaining control over TikTok’s US assets. However, since 2020, Chinese laws require local companies to obtain government approval before selling critical technologies to foreign investors. TikTok’s recommendation algorithm falls under this category, meaning ByteDance cannot finalize any deal without the Chinese government’s consent. Ideally, ByteDance aims to retain the algorithm rather than transfer it to US investors.
The Role of US and Chinese Authorities
Donald Trump holds the final say in determining whether TikTok meets US ownership requirements. If it does not, the platform risks being banned from the American market. While Trump cannot indefinitely delay the law’s enforcement, he can instruct the US Department of Justice to pause its implementation.
An emerging alternative is the purchase of TikTok’s US business by a sovereign wealth fund, rather than through a joint venture with American companies, notes NIXsolutions. China’s leadership has indicated no opposition to a joint venture with a 50% American stake. However, the decision ultimately rests with business representatives, provided Chinese law is upheld. The Chinese Foreign Ministry has emphasized that any agreement must align with national regulations.
TikTok’s future remains uncertain, yet we’ll keep you updated as more developments unfold.