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ByteDance Ltd. will be required to seek Chinese government approval to sell the U.S. operations of its short-video TikTok app under new restrictions Beijing imposed on the export of artificial intelligence technologies, according to a person familiar with the matter.
AI interface technologies such as speech and text recognition, and those that analyze data to make personalized content recommendations, were added to a revised list of export-control products published on the Ministry of Commerce’s website late Friday. Government permits will be required for overseas transfers to “safeguard national economic security,” it said.
The new restrictions cover technologies ByteDance uses in TikTok and will require the company to seek government approval for any deal, according to the person, asking not to be identified because the details aren’t public. The new rule is aimed at delaying the sale and is not an outright ban, the person said.
President Donald Trump’s administration has said ByteDance must sell the U.S. operations of its popular video-sharing app because of alleged national security risks. Microsoft Corp. and Oracle Corp. have submitted rival bids to ByteDance to acquire TikTok’s U.S. business, while Centricus Asset Management Ltd. and Triller Inc. were said to have made a last-minute pitch on Friday to buy TikTok’s operations in several countries for $20 billion.
China’s foreign ministry and commerce ministry did not immediately respond to requests for comment. ByteDance said in a statement the company was aware of the new restrictions and would “strictly comply with” the Chinese regulations on technology exports.
ByteDance should study the new export list and “seriously and cautiously” consider whether it should halt negotiations, Cui Fan, a trade expert and professor at Beijing’s University of International Business and Economics, told the official Xinhua News Agency.
Additional approval in Beijing is likely to delay and could undermine any transaction. Because the Chinese government review will take time, the TikTok deal may be delayed until after the U.S. elections in November, the person familiar said.
The revised rules would cover cross-border transfers of restricted technologies even within the same company, while the impact and consequences of failing to make appropriate applications would be very different if an international business is spun off, Cui said separately in an interview with Bloomberg.
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Technologies related to drones and to some genetic engineering methods and procedures were also added to the revised export-control list while others in areas like medical equipment were removed. The revisions are meant to promote China’s technological advancement and international cooperation, and “safeguard national economic security,” a commerce ministry representative said in a separate statement on Friday.
Technology exports encompass various transfers out of China including via trade, investment and patents, according to the statement. Any export of restricted technology will require letters of export permit intentions from Chinese authorities before negotiations can be held, while final permits are required before any transfer happens.
— With assistance by Sharon Chen, Steven Yang, Dingmin Zhang, and Miao Han
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August 30, 2020 at 12:47PM
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