In early August, the Trump Administration, citing national security concerns, issued an executive order giving ByteDance, the Chinese technology firm that owns the social media app TikTok, 90 days to sell its American operation. Another executive order compelled US firms to restrict business between Tencent Holdings, the parent company of WeChat, and US citizens. WeChat is the messaging app that is ubiquitous throughout China.
In a recent article Shang-Jin Wei, the N.T. Wang Chair in Chinese Business and Economy, called Trump’s executive order “counterproductive” and wrote that there are better solutions to privacy and security issues raised by TikTok and WeChat.
In this Q&A, Wei expands on the some of the problems around the possible sale of TikTok and WeChat and discusses what the future holds for Chinese-owned social media apps.
What do you think the appeal of TikTok is to large, established American firms?
TikTok’s estimated market value, which is reported to be around $20 billion, suggests it’s commercially successful. It's an entertainment and social media company that has figured out a way to get people hooked. For companies like Walmart or Microsoft that are not currently in this space, that's certainly a way to get into that market and to compete with the likes of Facebook. If you are Microsoft, acquiring some existing technology and combining it with your customer database and other stuff you are very good at makes commercial sense. It helps the company to get into another high-growing area.
What are the long-term implications of President Trump’s executive orders?
In my view, the executive orders, as issued, hurt US interests. On the surface, there's some transfer of value from the Chinese parent company of TikTok to whichever US company ends up buying it. It seems like the US gains in some narrow sense, but I think it damages the country's reputation as a place where entrepreneurship is protected and celebrated. It may also endanger many US firms in China.
Forcing international firms to be sold cheaply to the US shouldn't be the objective of a national security operation. It devalues the notion of national security.
If a foreign government can just announce a national security concern, without having to present evidence, then it can also duplicate President Trump’s tactic and force US companies to sell cheaply to their local firms. That's going to be terrible for US firms. The US is the world's leading source of multinational firms overseas, especially in China. There are far more American companies operating in China than Chinese firms operating in the US. So far, China has not been trying to intentionally create trouble for US corporations, but the risk of that has risen because of the executive orders.
Are there legitimate national security concerns with WeChat and TikTok?
The official rationale in the president's order on both TikTok and WeChat is that private data from US citizens and residents are collected by the apps, and can potentially be passed on to the Chinese government. For WeChat, there is an added concern that the Chinese government can push out propaganda to its users in the United States.
There are ways to deal with them without intentionally damaging the commercial value of a company and without hurting US businesses or their reputations. In the case of WeChat, I have suggested a three-pronged solution in my op-ed. First, the US government can order all US government employees and their family members not to download or use the app. Second, the US can order WeChat not to send push notices or advertisements to anyone who has registered an account with a US phone number or is traveling in the United States. It is easy for Tencent, which owns WeChat, to do it, and it has a commercial incentive to comply. Third, the US can order Apple, Google, and other US vendors to affix a warning label in the digital store so that anyone who wishes to download or use the app will be properly warned.
Do you have a sense of what the next evolution of the relationship between governments and social media apps will look like, especially in the context of the pandemic?
In the case of the pandemic, social media and smartphone apps have played interesting and positive roles in China. One of the reasons why the Chinese managed to get the pandemic under control faster than the US is smartphone digital technology. There's a feature called "green health code" on smartphones. They not only show you your individual health status, which incorporates data from tests and hospitals, but also provide effective contact tracing as well. Once one person is found either to have tested positive or have had exposure to the virus, the technology already knows who else has been in close contact with this person in a two-week period. If they have, an app on your phone will signal red. You get the red label indicating you are a high-risk person. Anyone who enters an office building, subway station, or a mall has to show a green health code. This gives people confidence that other people he or she will run into in these places have a low probability of being infectious. Of course, you still wear a mask and obey other social-distancing guidelines. This facilitates an orderly reopening of the economy.
This is an illustration that a proper use of the social media and digital technology can help to deal with the pandemic and help to minimize the economic loss from the pandemic.
N. T. Wang Professor of Chinese Business and Economy, Economics Division