Trump issues bans on China’s Tencent and ByteDance

Tencent WeChat

President Donald Trump has unveiled sweeping bans on US transactions with China’s ByteDance, owner of video-sharing app TikTok, and Tencent, the operator of messenger program WeChat, in a significant escalation of tensions with China.

KEY POINTS:

  • US President Donald Trump unveils a ban on transactions with ByteDance and Tencent, two of the leading Chinese platform companies
  • The Executive Order calls ByteDances TikTok and Tencents WeChat “significant threats”
  • The EO comes into effect in 45 days

The executive orders, which go into effect in 45 days, come after the Trump government said this week it was stepping up efforts to purge “untrusted” Chinese programs from US electronic networks and called TikTok and WeChat “significant threats.”

The hugely popular Tiktok has come under fire from US lawmakers and the government over domestic security concerns surrounding data collection, amid growing distrust between Washington and Beijing.

Earlier in the week, US Secretary of State Mike Pompeo expanded efforts on a program dubbed”Clean Network” to prevent various Chinese apps as well as Chinese telecoms companies from accessing sensitive information on US citizens and companies.

James Lewis, a technology expert with Washington-based think tank Center for Strategic and International Studies, said the orders appeared coordinated with Pompeo’s announcement.

“Absolutely, China will retaliate.”

TikTok has 100 million consumers in the US. While WeChat isn’t on the same level of popularity in America, it is ubiquitous in China. Additionally it is widely used by expat Chinese in America as a platform for communications with family and friends as well as a medium for other services like e-commerce and games.

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WeChat and TikTok were among 59 largely Chinese programs outlawed in India in June for threatening the country’s “sovereignty and integrity.”

Operator Tencent is China’s next firm after Alibaba at $686 billion. It is also China’s largest video game company and this summer opened California-based studio.

Its shares fell nearly 10 percent in Hong Kong after Trump’s order. The yuan, which is sensitive to Sino-US relations, lost 0.4%.

SWEEPING POWER

Trump issued the orders under the International Emergency Economic Powers Act, a law which grants the administration sweeping power to bar American citizens or firms from trading or conducting financial transactions with sanctioned parties.

Commerce Secretary Wilbur Ross will identify transactions covered by the prohibition after the orders take effect in mid-September.

The development comes soon after the US ordered China to vacate its consulate in Houston, Texas, followed by China’s order requiring the US to vacate its consulate in the southwestern city of Chengdu.

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But tension has been simmering between the two powers for months, with the United States taking issue with China’s handling of this novel coronavirus outbreak and proceeds to suppress freedoms in Hong Kong.

Trump said this week he would encourage the sale of TikTok’s US operations to Microsoft if the US government obtained a”substantial portion” of the sales price. He nevertheless said he will ban the service in the United States on the 15th of September, though some Republicans have raised concerns about the political fallout of banning such a popular app in the election year.

The app could be used for disinformation campaigns that benefit the Chinese Communist Party, and the United States”must take aggressive action against the owners of TikTok to protect our national security,” Trump said in one order.

This data collection threatens to allow the Chinese Communist Party access to Americans’ private and proprietary information.

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The order would effectively ban WeChat in the United States in 45 days by barring”to the extent allowed under applicable law, any trade that’s related to WeChat by any individual, or with respect to any property, subject to the authority of the United States, together with Tencent Holdings Ltd”

The order “calls TikTok a national security threat,” said Derek Scissors, an expert on Sino-US economic relations at the American Enterprise Institute think tank. “Either we’ve missed the danger of three years or it only became one and we are waiting 45 days.”

The team at Platform Executive hope you have enjoyed this news article. Initial reporting via our content partners at Reuters. Reporting by David Shepardson and Alexandra Alper. Additional Reporting by Mohammad Zargham, Echo Wang, Nandita Bose and David Shepardson. Editing by Muralikumar Anantharaman and Christopher Cushing.

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