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MICROSOFT CORPORATION

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Trump Demand for Cut of TikTok Deal Reignites Anger in China

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08/04/2020 | 10:10am EDT

By Eva Xiao

HONG KONG -- President Trump's suggestion that the U.S. government take a cut from the forced sale of the viral Chinese app TikTok sparked a new round of anger and reflection in China, as TikTok's founder warned employees about "rising anti-Chinese sentiment."

On Tuesday, a number of prominent figures in China, including Google's former country head, lambasted the U.S. as unfairly stifling China's first global internet hit -- while defending Beijing's own restrictions on American technology giants.

The U.S. has "never offered any evidence for the accusations against it, " venture capitalist Kai-fu Lee, who oversaw the China operations of Alphabet Inc.'s Google from 2005 to 2009, wrote in a private message about TikTok that was leaked and circulated widely online on Tuesday.

The fate of TikTok, which the U.S. says poses national-security risks to its 100 million American users, appeared to be thrown into question over the weekend. On Friday, Mr. Trump floated an outright ban on the short-video app, temporarily halting negotiations between Microsoft Corp and TikTok's parent Bytedance Ltd. for the app's U.S. operations. That fueled charges in China that the U.S. was unfairly blocking a successful Chinese product.

But Mr. Trump's remark on Monday that the U.S. government should benefit financially from the deal stirred a new wave of public anger in China.

Hu Xijin, the editor in chief of the Global Times, a Communist Party-backed tabloid, derided Mr. Trump's demand that the U.S. Treasury receive a "very substantial" portion of the proceeds as "open robbery."

"The world is watching and God is watching...how President Trump is turning the once great America into a rogue country," Mr. Hu wrote.

Meanwhile, Zhang Yiming, the 37-year-old founder of TikTok and Beijing-based Bytedance, told employees Tuesday in an internal letter reviewed by The Wall Street Journal to disregard any "short-term praise or loss and patiently do the right thing."

Mr. Zhang acknowledged the geopolitical winds that the service is facing, including in India, which was TikTok's biggest market by app downloads until New Delhi banned the app following a deadly border clash with China in June.

In a reflection of the pressure that the TikTok founder is also facing at home, Mr. Zhang also restricted access to his personal page on China's Twitter-like Weibo service after Chinese social-media users slammed him for "kneeling" to the U.S. by considering selling TikTok's U.S. operations to Microsoft.

The TikTok saga has reignited discussions around Beijing's own restrictions on U.S. tech companies, namely the blocking of Facebook Inc., Twitter Inc. and Alphabet Inc.'s Google, whose services are inaccessible in China. The country's online censorship apparatus, dubbed the "Great Firewall," bars mainland Chinese users from accessing a host of websites and overseas platforms, including news sites and social media, without technical workarounds.

Over the weekend, James Liang, co-founder and chairman of Chinese online travel giant Trip.com Group Ltd., suggested taking down the Great Firewall and opening the country up to Western players -- a move that he said would "thoroughly smash" the legitimacy of the U.S's TikTok policy. Mr. Liang's post was quickly removed.

Trip.com didn't immediately respond to a request for comment.

Mr. Lee, the former Google China head, wrote in his leaked message that China was willing to grant access to foreign internet firms as long as they obeyed Chinese law, including requirements to store data in China and censor content. Google pulled its search operation out of China after deciding it no longer wanted to follow those rules, he said.

That, in addition to Mr. Trump's demand for a cut of the deal, makes the U.S.'s handling of TikTok "not only incomparable with Google, but also inconceivable," he wrote.

Sinovation Ventures, Mr. Lee's current firm, didn't dispute the authenticity of the message but declined to comment further.

Beijing was quick to defend its own internet restrictions, blaming the intransigence of American tech firms for their lack of access to China's market. Companies must "strictly abide" by Chinese laws, China's Foreign Ministry said Monday.

"Under this premise, we welcome any foreign enterprises to enter the Chinese market," spokesman Wang Wenbin said, accusing the U.S. of applying "double standards" in threatening to ban TikTok.

Mr. Hu's newspaper, the Global Times, said in an editorial Sunday, "China has never banned US high-tech companies from doing business in the country." TikTok, on the other hand, "fully cooperates" with U.S. law, it said.

In China, consumer-facing tech firms are expected to cull content deemed unacceptable by the Chinese Communist Party -- a requirement that eventually pushed Google Inc. to exit from the mainland market in 2010. On top of Google's struggles with Beijing's censorship demands, its withdrawal from China was also precipitated by a cyberattack the company traced to Chinese hackers -- or what co-founder Sergey Brin called the "straw that broke the camel's back."

On the other hand, U.S. platforms that operate in China, including LinkedIn -- which was acquired by Microsoft in 2016 -- has faced criticism outside the mainland for censoring users based in China.

While China's government may justify blocking foreign internet companies for refusing to obey censorship rules, "censorship will never be seen as a legitimate application of Chinese law by many audiences outside China, " said John Lee, a senior analyst at the Berlin-based Mercator Institute for China Studies.

At the same time, he said, the White House's citing of "national security" in taking action against Chinese companies without providing evidence "is damaging to the U.S. reputation as a rule-of-law society and upholder of a global rules-based order."

When it comes to the security of user data, every social-media platform is vulnerable to hacking by governments no matter who owns them, said Paul Haskell-Dowland, a cybersecurity expert at Edith Cowan University in Perth, Australia.

"Any of these social media apps is only one update away from being a spy operation," he said.

--Raffaele Huang and Rachel Pannett contributed to this article.

Write to Eva Xiao at eva.xiao@wsj.com

 

Stocks mentioned in the article
ChangeLast1st jan.
ALPHABET INC. 1.14% 1439.06 Delayed Quote.7.44%
FACEBOOK 2.12% 254.82 Delayed Quote.24.15%
MICROSOFT CORPORATION 2.28% 207.82 Delayed Quote.28.85%
MKS INSTRUMENTS, INC. -0.48% 107.54 Delayed Quote.-2.25%
REMARK HOLDINGS, INC. 1.77% 1.15 Delayed Quote.123.30%
TONGCHENG-ELONG HOLDINGS LIMITED -1.48% 13.3 End-of-day quote.-4.86%
TRIP.COM GROUP LIMITED 8.65% 30.15 Delayed Quote.-10.11%
WEIBO CORPORATION -5.74% 32.54 Delayed Quote.-29.80%
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Net income 2021 49 086 M - -
Net cash 2021 82 326 M - -
P/E ratio 2021 32,3x
Yield 2021 1,04%
Capitalization 1 573 B 1 573 B -
EV / Sales 2021 9,51x
EV / Sales 2022 8,48x
Nbr of Employees 163 000
Free-Float 98,6%
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John Wendell Thompson Independent Chairman
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