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TikTok Sale in Turmoil After China Updates Tech Export Rules

By Rich Duprey – Aug 31, 2020 at 9:35AM

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The new regulations could delay any potential purchase by a U.S. tech company.

The sale of Chinese video-sharing app TikTok to a U.S. tech company hit a potential roadblock after Beijing updated technology export rules that could delay a purchase.

After President Trump gave TikTok owner ByteDance 90 days to sell the app over national security concerns, China issued new regulations on Friday that could restrict or even ban the export of certain technology while requiring companies to first seek government approval.

Two boxing gloves one with the U.S. flag, the other with China's flag

Image source: Getty Images.

TikTok is under scrutiny because it had been surreptitiously collecting vast amounts of data on app users that the Trump administration believes could be used for blackmail, corporate espionage, or tracking government employees.

Wells Fargo forbids employees to have TikTok on their phones, as does the U.S. armed forces and the Transportation Security Administration. India has banned the app, while Japan, Pakistan, Hong Kong, and Indonesia are considering it.

Trump's edict caused a flurry of interest by tech companies, including Oracle (ORCL -2.24%) and Microsoft (MSFT -1.27%), which partnered with Walmart (WMT -2.50%) and Japan's Softbank Group (SFTBF -3.54%) to bid on the app.

But, according to the British newspaper The Guardian, China just updated its export rules to include what a Chinese trade expert called "some forefront technologies," such as artificial intelligence, voice recognition, and content recommendation that would need government approval before they could be transferred, on the grounds of national security.

The trade expert was quoted by the official government news agency Xinhua as saying ByteDance should "seriously and cautiously consider whether it is necessary to suspend" the app's sale, suggesting the weight of the government is behind those sentiments.

However, CNBC just reported ByteDance has chosen a bidder for TikTok and a deal could be announced as soon as tomorrow.


Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft. The Motley Fool recommends Softbank Group and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool has a disclosure policy.

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