China may have thrown a wrench into the looming TikTok sale — here's what it could mean for TikTok as it tries to avoid a Trump ban

China may have thrown a wrench into the looming TikTok sale — here's what it could mean for TikTok as it tries to avoid a Trump ban
Samantha Lee/Business Insider
  • Days before TikTok is expected to announce a potential sale of its US operations, Chinese officials implemented new restrictions that could throw a wrench in the company's plans.
  • The new rules would require TikTok to obtain a license from the Chinese government before selling tech to a US company, potentially giving China veto power over the sale.
  • Meanwhile, the Trump administration has said TikTok will be banned if it isn't sold to a US company by mid-September.
  • Here's what the latest developments could mean for the future of TikTok.

As TikTok looks for a buyer to avoid being banned in the US, it now faces a new obstacle — this time from the Chinese government.

TikTok, which is owned by China-based ByteDance, has scrambled to rapidly reach a deal to sell its US operations after President Donald Trump threatened to ban the app by mid-September if it's still owned by a Chinese company. The app is reportedly weighing a joint offer from Microsoft and Walmart, as well as an offer from Oracle.

Now, regulations imposed by Chinese officials could make it harder for ByteDance to organize a sale.

Complimentary Tech Event
Transform talent with learning that works
Capability development is critical for businesses who want to push the envelope of innovation.Discover how business leaders are strategizing around building talent capabilities and empowering employee transformation.Know More

China announced on Friday that it would implement restrictions on how tech can be exported, requiring companies to obtain a government-issued license for a sale. The regulations could give Chinese authorities veto power over a potential TikTok deal.

Here's what the new restrictions could mean for the future of TikTok.


China's new restrictions target TikTok's most valuable asset: its algorithm

While China already enforced a list of "forbidden and restricted technology exports," it updated them last week to include "personalized information recommendation services based on data analysis."

TikTok's algorithm is one of its prized assets — its proprietary "For You" formula recommends videos unique to each user based on an intricate web of weighted signals.

A Chinese government trade adviser told the state's Xinhua News Agency on Saturday that selling algorithms to firms in other countries would be considered a "restricted technology export" under the new restrictions.

The restrictions could delay a TikTok sale, running down the clock in advance of Trump's ban

Under China's new regulations, a TikTok sale wouldn't be prohibited — rather, ByteDance would need to obtain a license from the Chinese government before finalizing the sale.

But that process could take up to 30 days, according to the regulations. Meanwhile, Trump has set a mid-September deadline for a potential sale, threatening to ban TikTok in the US if a deal isn't reached by then.


However, as the Financial Times notes, the new Chinese restrictions could give ByteDance a reasonable path to argue for an extension of Trump's deadline, potentially buying it more time to explore its options.

China's move extends far beyond TikTok — it's the latest escalation in an ongoing trade war

The new regulations are in part an extension of the growing trade war between China and the US.

The Trump administration has previously blacklisted telecoms hardware maker Huawei, a Chinese company with far more market value than ByteDance.

Trump's latest escalation came in the first week of August, when he signed executive orders banning US companies' transactions with both ByteDance and WeChat, another Chinese tech giant, among other actions to limit interaction between US and Chinese companies.

Analysts told the Financial Times that China's latest restrictions could give the country a leg up in future trade negotiations. Feng Chucheng, a political risk analyst at Plenum, told the FT that China wants to signal that it doesn't approve of the TikTok sale, "but they don't want to trigger another US retaliation."


US companies might be wary of signing a deal to buy TikTok if there's a chance China will veto it

The slew of companies jockeying to buy TikTok's US operations may reconsider their offers now that Chinese regulations could pose a roadblock to a deal.

ByteDance and its primary suitors — including Microsoft, Walmart, and Oracle — slowed down negotiations this weekend in the wake of China's announcement, according to The Wall Street Journal.

Nevertheless, ByteDance reportedly chose a buyer as of Monday morning and is expected to announce a deal this week, CNBC reported.