In a crucial move aimed at ending years of legal and political wrangling, TikTok on Thursday that it has signed a joint venture agreement with a group of prominent American investors. This move comes as a lifeline to the popular Chinese app, allowing it to continue operating in the United States and averting the looming threat of a complete ban due to concerns about its Chinese ownership and national security.
Details of the agreement and the new entity
According to major US media outlets such as Bloomberg and Axios, an internal memo sent by TikTok CEO Xu Zhou to employees revealed that parent company ByteDance has officially approved the structure of the new entity. This strategic alliance includes giant technology and investment companies, most notably Oracle and Silver Lake, as well as Abu Dhabi-based investment firm MGX, as key investors in the project.
In his memo, Chu explained that ByteDance would retain only about 20% of the new entity, the maximum percentage allowed by US law for Chinese companies in such sensitive cases, thus ensuring that effective control would transfer to the US side and its allies.
Context of the conflict: From threat to settlement
This agreement was not a spur-of-the-moment decision, but rather the culmination of a long-standing conflict between Washington and Beijing over technology and data. The roots of the crisis can be traced back to the administration of former President Donald Trump in 2020, when he attempted to ban the app through executive orders, before matters evolved legislatively under President Joe Biden.
The current arrangement is a direct response to the law signed by President Biden, which requires ByteDance to sell TikTok's US operations or face a complete ban from American app stores. US lawmakers have repeatedly expressed concern that the Chinese government could use the app to collect sensitive data on American citizens or manipulate public opinion through its sophisticated algorithms.
Security guarantees and the future of data
In an effort to reassure regulators, Xu Zhu emphasized that the joint venture would operate as a completely independent entity. He stated in the memo, "Upon completion of the transaction, the U.S. joint venture will operate under U.S. data protection authority and will be subject to strict oversight regarding algorithm security and content moderation." This means that U.S. user data will be stored and processed within Oracle's cloud infrastructure, addressing any concerns about data being transferred to China.
Political and economic dimensions
This deal has interesting political dimensions, as Oracle founder Larry Ellison is a close ally of President-elect Donald Trump. Trump has previously referred to Ellison as a key figure capable of resolving the TikTok issue. This partnership highlights the overlap between technology and politics, with Ellison's strong return to the forefront through his investments in artificial intelligence and his close ties to the incoming US administration, which could facilitate the deal's passage through complex regulatory channels.
This agreement is expected to have a significant positive impact on the digital economy, as it ensures the continuation of a platform relied upon by millions of content creators and small businesses in the United States for marketing and profit, thus sparing the market an economic shock that was anticipated if the ban were implemented.
