Facebook, Google and Microsoft have stopped processing data requests from Hong Kong police in response to a sweeping national security law imposed by Beijing. ByteDance has gone one better by withdrawing an app from the city altogether. Hong Kong teens will no longer be able to upload videos of themselves dancing and lip-syncing on the Chinese company’s popular app TikTok. Another small thread connecting the Chinese and US technospheres has been broken.
Douyin, the censored Chinese version of TikTok, is still available in Hong Kong, a territory of little financial importance to ByteDance. But TikTok’s new chief executive Kevin Mayer still risks offending Beijing. Almost 90 per cent of its in-app spending comes from China.
However, China cannot produce much more growth for ByteDance. The market is already saturated. Tech giants Tencent, Baidu and Alibaba all compete for top spot. TikTok needs international users for growth. India, previously the market with the biggest number of users outside China, blocked TikTok last week, citing security concerns. That leaves the US.
The US is crucial to TikTok’s plans to become a global social media platform to rival Facebook. ByteDance’s revenues, reported to have reached about $17bn last year, already put it well ahead of microblogging social media network Twitter. Secretary of state Mike Pompeo’s threat to close the app in the US threatens any future lift in ByteDance’s estimated private valuation of $110bn.
Beijing’s new security law means tech companies in Hong Kong have to monitor social media platforms and censor content critical of the Chinese government or face prosecution. If TikTok had gone down that path, it would have certainly lost its US business. Had it resisted, it would have followed Google. The search giant was forced to shut down Chinese operations after pushing back on government requests to censor search results.
Mr Mayer must reason that pulling TikTok out of Hong Kong buys ByteDance some time. It is unlikely to be the last. But in the escalating commercial war between the US and China, no company active across the two countries can expect to keep both happy for long.
Expect polarisation to deepen. Other global tech companies will quit Hong Kong, a city once seen as an Asian financial hub. For unhappy Hong Kongers, the national security law signals that their home lies irrefutably within Chinese borders. That applies in technology, as in everything else.
The Lex team is interested in hearing more from readers. Will businesses ultimately have to choose between China or the US? Please tell us what you think in the comments section below
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