TikTok faces potential US ban if Chinese owners do not sell stake

The Biden administration has threatened to ban TikTok if its Chinese owners do not sell their stake in the social media company to address growing national security concerns, according to two people familiar with the matter.

The Committee on Foreign Investment in the United States (Cfius) — an inter-agency panel that evaluates foreign investment in the US — made the divestiture request recently as part of its ongoing review into the company, which is owned by Beijing’s ByteDance, the people said.

TikTok, the popular short-form video app, has faced growing scrutiny over fears data it collects on American users could be passed to the Chinese government and Communist party. While it has denied those claims, some Republican and Democratic senators have urged the app be banned or ByteDance to divest its US arm. The Wall Street Journal first reported news of the demand.

According to people familiar with the matter, 60 per cent of ByteDance shares are owned by global investors, while 20 per cent are owned by employees and a further 20 per cent by its founders, including Zhang Yiming and Liang Rubo, ByteDance’s current chief executive.

TikTok’s chief executive, Shou Zi Chew, is set to testify before the House energy and commerce committee next week to discuss its data security practices, as well as its relationship with China.

For two years, TikTok has been working on a national security deal with the US government in response to the scrutiny. So far, TikTok has spent more than $1.5bn on “Project Texas”, a corporate restructuring plan to safeguard user data and content from Chinese influence through a partnership with US cloud software group Oracle in order to meet the Cfius requests.

However, negotiations over the deal have stalled in recent months. Last week, Senate Democrats and Republicans introduced a bill that would give the administration new powers to ban Chinese apps that pose security threats, including TikTok, which the White House has endorsed.

Following the sale demand, TikTok is evaluating its options but plans to continue working on Project Texas, one person familiar with the situation said.

“If protecting national security is the objective, divestment doesn’t solve the problem: a change in ownership would not impose any new restrictions on data flows or access,” TikTok said in a statement.

“The best way to address concerns about national security is with the transparent, US-based protection of US user data and systems, with robust third-party monitoring, vetting, and verification, which we are already implementing.”

The Treasury department, which leads Cfius, declined to comment.

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