Regarding the current state of TikTok vs USA I think I can lend some American perspective here:
1. Some element, I believe, is an attempt at karma/business revenge. Considering China has banned Facebook, Twitter, and pretty much any other American social media app there is probably some political will to do the same. (Not saying this is right or wrong just the motivation.) also I believe yahoo was forced to divest from Alipay.
Very smart intelligence people and engineers can do a lot with just an app. So the risk of it being abused is not zero. The whole “spiritual opium” complaint from some US politicians is very silly though. I don’t see how TikTok is more harmful to mental health than Twitter for example.
3. That leaves us with the final piece. What USA tech companies have survived in China despite all there banning of American tech. Only Apple and Microsoft basically. They did this by basically bending over backwards for Chinese regulations (source code audits, censorship agreements, domestic state owned iCloud, etc). Maybe this falls under “forced technology transfer” Things that no other market has gotten from Apple or Microsoft. It will be interesting to see ByteDance could do the same strategy to remain in USA (I believe they already switched to US cloud provider). But if TikTok can be relatively easily replaced by META or YouTube or another app probably an uphill battle. Also idk if the United States congress is even organized enough and has the political will at the moment to make all these demands and hire someone to audit all the source code.
4. While I am sure certain people in US and China can make the claim a USA forced divestment shows there is no “freedom of speech” and is hypocritical, I think others will look at what kind of content is allowed on social media and still consider there is a difference in censorship rules.
All of this is just my opinion and read on the current industry/geopolitics as an outsider.
Your substack is helpful gaining understanding, keep up the good work.
"Considering China has banned Facebook, Twitter, and pretty much any other American social media app"
That's gross simplification. CG presented to all these companies the option of staying in China by following its regulations, such as data storage (not unlike EU's current requirements) and censorship. It is the latter to which companies balked and decided to pull out.
No, I think your view is actually the gross simplification. Although, to be fair, there is perhaps more nuance with Google.
Google was briefly allowed (and thrived afaik in the early/mid 2000s) but withdrew from the market due to censorship disagreements.
But Facebook, Twitter, YouTube, Flickr, Hotmail and others were all proactively banned as far as I know. I don’t see much evidence there was large effort by Chinese regulators to keep them in the country. (You are welcome to point me to their offers to retain this companies)
Why?
Because It was much more convenient for China to block most outside social media companies and instead foster their own domestic ones. Both for their own nations development and also it is much easier to regulate.
Nice description of Li Qiang: “In terms of politics, he knows full well that in the current environment, highlighting himself is not in line with the zeitgeist of political consolidation.”
Phenomenal summary of the situation. As someone stateside, I can tell you that we are addicted to simplistic "good versus evil" narratives and tend to reduce most complex situations with many shades of gray down to a simple black and white matter. It's reflected in our highly polarized political system that's leaving no room for compromise between the two political parties.
In fact, I can't think of many socio-political and economic issues where positions aren't entirely polarized.
Robert, sometimes I wonder if you are too subtle for audiences outside China, thought I enjoy the insiders' nod. 'The stock is highly concentrated in the hands of Mr. Zhong, which unlike Internet services or EVs, is not a critical industry. (Beijing could shut down the sale of bottled water tomorrow as an environmental issues and the world would go on smoothly).'
TikTok
I'm wondering if I should buy stocks in VPN operators. I can see this effort by USA driving a lot of internet creators in USA into promoting ways around the great wall of western censorship.
The Premier Premier.
I enjoyed reading it, nicely put. It might help increase the usefulness if we had an idea of how much trouble factionalism might still create and what are factors opposing or at least passively obstructing his actions.
#4 Middle East money purchasing core China assets from US investors, at a discount
I was a little surprised to read that US had a large hand in a critical industry like industrial gas, but on second thought guessed it still must be a minority share, yes? If so, then we have Middle East US Government Bond holders getting rid of high risk bonds for Chinese assets, by selling same bonds to USA investors who are better situated to squeeze the government if it tries to inflate away the bond debt. However, China is also holding a lot of these same bonds, part of the Belt and Road program is to offload these risks and get overseas assets or soft power in return. This is a long way of asking is China also going to trade off some of it's bonds to USA investors holding China assets? Also, there is one big downside to all of this, fewer voices in Washington looking to protect their investments by keeping war parties under control. Something to discuss one day?
I'm sure I've got errors in my comments too, but fyi typo in: 'A few weeks ago I recouned my story of how local government officials.' That probably should be "recounted".
Thanks for the typo reminder! I should set up a prize for spotting typos.
PAG controls ~100% of AirPower. It's a big buyout. I am not sure how many investors of PAG are coming from the US right now, but I am guessing there are a lot.
Wow, that's a big surprise that AirPower was 100% FEC. If you don't mind, then please may I ask what was their market share?
If I set up a rewards system for all my typos, then I'd be trying to sell my own debt bonds in no time. Trust me, the grammar grannies will do it for free.
I didn’t find exact data, the data I can find varies from 10% to 20%. So it’s sizable but not dominant. The other major players are also western, like Linde, Air Products, Air Liquide.
Sorry I missed you on this trip! I'd love to be on your podcast in some capacity.
Regarding the current state of TikTok vs USA I think I can lend some American perspective here:
1. Some element, I believe, is an attempt at karma/business revenge. Considering China has banned Facebook, Twitter, and pretty much any other American social media app there is probably some political will to do the same. (Not saying this is right or wrong just the motivation.) also I believe yahoo was forced to divest from Alipay.
2. Despite many US politicians saying silly things or asking dumb questions to ByteDance CEO there is certainly some risk with allowing software code to run on 100s of millions of phones in everyone’s pocket. In one incident they used location tracking for journalist who installed the app to find out who they were talking to at the company. https://www.forbes.com/sites/emilybaker-white/2022/12/22/tiktok-tracks-forbes-journalists-bytedance/?sh=59bb6c737da5#:~:text=ByteDance%20confirmed%20it%20used%20TikTok,reported%20by%20Forbes%20in%20October.
Very smart intelligence people and engineers can do a lot with just an app. So the risk of it being abused is not zero. The whole “spiritual opium” complaint from some US politicians is very silly though. I don’t see how TikTok is more harmful to mental health than Twitter for example.
3. That leaves us with the final piece. What USA tech companies have survived in China despite all there banning of American tech. Only Apple and Microsoft basically. They did this by basically bending over backwards for Chinese regulations (source code audits, censorship agreements, domestic state owned iCloud, etc). Maybe this falls under “forced technology transfer” Things that no other market has gotten from Apple or Microsoft. It will be interesting to see ByteDance could do the same strategy to remain in USA (I believe they already switched to US cloud provider). But if TikTok can be relatively easily replaced by META or YouTube or another app probably an uphill battle. Also idk if the United States congress is even organized enough and has the political will at the moment to make all these demands and hire someone to audit all the source code.
4. While I am sure certain people in US and China can make the claim a USA forced divestment shows there is no “freedom of speech” and is hypocritical, I think others will look at what kind of content is allowed on social media and still consider there is a difference in censorship rules.
All of this is just my opinion and read on the current industry/geopolitics as an outsider.
Your substack is helpful gaining understanding, keep up the good work.
"Considering China has banned Facebook, Twitter, and pretty much any other American social media app"
That's gross simplification. CG presented to all these companies the option of staying in China by following its regulations, such as data storage (not unlike EU's current requirements) and censorship. It is the latter to which companies balked and decided to pull out.
No, I think your view is actually the gross simplification. Although, to be fair, there is perhaps more nuance with Google.
Google was briefly allowed (and thrived afaik in the early/mid 2000s) but withdrew from the market due to censorship disagreements.
But Facebook, Twitter, YouTube, Flickr, Hotmail and others were all proactively banned as far as I know. I don’t see much evidence there was large effort by Chinese regulators to keep them in the country. (You are welcome to point me to their offers to retain this companies)
Why?
Because It was much more convenient for China to block most outside social media companies and instead foster their own domestic ones. Both for their own nations development and also it is much easier to regulate.
Nice description of Li Qiang: “In terms of politics, he knows full well that in the current environment, highlighting himself is not in line with the zeitgeist of political consolidation.”
Sounds a lot like Zhou Enlai.
Phenomenal summary of the situation. As someone stateside, I can tell you that we are addicted to simplistic "good versus evil" narratives and tend to reduce most complex situations with many shades of gray down to a simple black and white matter. It's reflected in our highly polarized political system that's leaving no room for compromise between the two political parties.
In fact, I can't think of many socio-political and economic issues where positions aren't entirely polarized.
Water Fight
Robert, sometimes I wonder if you are too subtle for audiences outside China, thought I enjoy the insiders' nod. 'The stock is highly concentrated in the hands of Mr. Zhong, which unlike Internet services or EVs, is not a critical industry. (Beijing could shut down the sale of bottled water tomorrow as an environmental issues and the world would go on smoothly).'
TikTok
I'm wondering if I should buy stocks in VPN operators. I can see this effort by USA driving a lot of internet creators in USA into promoting ways around the great wall of western censorship.
The Premier Premier.
I enjoyed reading it, nicely put. It might help increase the usefulness if we had an idea of how much trouble factionalism might still create and what are factors opposing or at least passively obstructing his actions.
#4 Middle East money purchasing core China assets from US investors, at a discount
I was a little surprised to read that US had a large hand in a critical industry like industrial gas, but on second thought guessed it still must be a minority share, yes? If so, then we have Middle East US Government Bond holders getting rid of high risk bonds for Chinese assets, by selling same bonds to USA investors who are better situated to squeeze the government if it tries to inflate away the bond debt. However, China is also holding a lot of these same bonds, part of the Belt and Road program is to offload these risks and get overseas assets or soft power in return. This is a long way of asking is China also going to trade off some of it's bonds to USA investors holding China assets? Also, there is one big downside to all of this, fewer voices in Washington looking to protect their investments by keeping war parties under control. Something to discuss one day?
I'm sure I've got errors in my comments too, but fyi typo in: 'A few weeks ago I recouned my story of how local government officials.' That probably should be "recounted".
Thanks for the typo reminder! I should set up a prize for spotting typos.
PAG controls ~100% of AirPower. It's a big buyout. I am not sure how many investors of PAG are coming from the US right now, but I am guessing there are a lot.
Wow, that's a big surprise that AirPower was 100% FEC. If you don't mind, then please may I ask what was their market share?
If I set up a rewards system for all my typos, then I'd be trying to sell my own debt bonds in no time. Trust me, the grammar grannies will do it for free.
I didn’t find exact data, the data I can find varies from 10% to 20%. So it’s sizable but not dominant. The other major players are also western, like Linde, Air Products, Air Liquide.
Five Year Plans are handy, too.