What you need to know
- The Chinese government has updated rules that will likely require permission to sell TikTok to any foreign company.
- According to the Chinese government, the rules "formalize the management of technology export" and "protect national security."
- The updated rules affect the sale of data processing and speech and text recognition technology.
TikTok's potential purchase by Microsoft or another tech giant may be in jeopardy due to new rules from the Chinese government. As reported by CNN, the Chinese government has updated rules regarding certain types of technology being sold to foreign buyers. The update covers data processing, speech and text recognition — which are integral to TikTok. According to China's Ministry of Commerce and Ministry of Science and Technology, the updates to the rules "formalize the management of technology export" and "protect national security."
While the notices from the Chinese government don't mention TikTok or its owner ByteDance by name, the new rules could block a sale of TikTok to a U.S.-based company such as Microsoft. According to experts cited by CNN, the new rules would likely require government permission to sell TikTok to a foreign company.
ByeDance General Counsel Erich Andersen said in a statement that ByteDance is studying the new rules. He also stated that "As with any cross-border transaction, we will follow the applicable laws, which in this case include those of the US and China."
The potential sale of TikTok has already been affected by government rulings, though it was the Trump administration that affected the deal up to this point. President Trump has threatened to ban the app entirely in the U.S. unless parts of it are sold to a U.S. company.
Elena Chachko, a lecturer on law at Harvard Law School, told CNN that the Chinese government's new rules might be part of a "tit-for-tat dynamic." She added that China is "making clear that the United States doesn't have full control over the future of US TikTok operations and a potential TikTok sale."
TikTok's value comes in large part thanks to its underlying technology, including AI and algorithms that determine what appears in people's feeds. The actions from the Chinese government could prevent this technology from being purchased by a U.S.-based company.