8 months ago • 2 mins
US politicos across the aisle put TikTok's CEO in the hot seat late last week, probing the company's rumored ties to the Chinese government.
What does this mean?
In a marathon congressional grilling session, TikTok's CEO stuck to his guns, insisting that the firm doesn't dish out user data to any government. What’s more, TikTok’s much-vaunted "Project Texas" – a grand plan to erect a data storage fortress in the Lone Star State – allegedly aims to keep all US user data within American borders. But lawmakers seemed less than convinced: TikTok’s under the umbrella of Chinese firm ByteDance, after all, which could be cozy with government officials, and that means the US is treating this affair as one of “national security”.
Why should I care?
Zooming out: Two to tango.
US authorities seem to be angling for either an outright ban on the popular app or a sale to American bidders, but both options look like non-starters right now. A ban could provoke the ire of TikTok's 150 million US devotees, which could be a dance with death for any politician's popularity. And a sale looks impossible too, given that the Chinese government’s already pooh-poohed that idea. To top it off, TikTok's price tag could stretch to hundreds of billions – and there aren’t many firms with the funds to cover that.
The bigger picture: Eye for an eye.
The prospect of a wholesale ban on TikTok will have competitors like Meta and Alphabet rubbing their hands together in glee. And there’s little doubt that those firms’ lobbyists will be hard at work in Washington, pointing out that Google and Facebook are forbidden in China, which would make banning TikTok a tit-for-tat kind of deal. But the US companies that make a killing in the Middle Kingdom (like Starbucks, McDonald's, and Estée Lauder) won’t agree: they’ll be shaking in their boots about possible Chinese retaliation – so keep an eye on their share prices as this plays out.
Disclaimer: These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment advisor.
/3 • Your free quarterly content is about to expire. Uncover the biggest trends and opportunities. Subscribe now for 50%. Cancel anytime.