A striking story is bubbling away in the private capital world about Chinese tech company ByteDance, owner of the short-form video platform TikTok.
This is not (just) about accusations that TikTok』s user community has a pro-Palestinian slant; nor that social media is harming teenage mental health. Instead, this issue is ByteDance』s balance sheet: financiers close to the company recently told the FT that this shows more than $50bn in free cash, of which $5bn is earmarked for buybacks — a prospect that might tempt some investors to sell out, given the rising (geo)political heat.
Foreign policy experts and investors alike should watch this closely. For as 2024 looms, ByteDance has become a key litmus test of US-China relations — and the extent to which they are sparking not just a Sino-American tech, trade and cyber war, but a capital markets conflict too.
That is because ByteDance』s ownership structure is striking. The group is often described as 「Chinese」, since its founder, Zhang Yiming, hails from the mainland and has been labelled a 「mouthpiece」 of the Communist party by US officials. However 60 per cent of ByteDance shareholders are 「international」, mostly American.
Congressional testimony suggests these include equity funds, such as BlackRock and Fidelity, who hold stakes as part of emerging market baskets. However the venture funds Coatue, General Atlantic, SoftBank, Sequoia, KKR and Susquehanna have notable stakes and their representatives — such as General Atlantic』s Bill Ford — are on the board.
The problem for them is that parts of Congress and the US foreign policy establishment increasingly view the platform as a Chinese tool to manipulate American minds, either directly or by stoking dissent. One sign of this emerged last month when Nikki Haley, a Republican presidential candidate, accused the platform of a deliberate pro-Palestinian bias, citing research commissioned by Anthony Goldblum, a US tech investor.
An arguably more striking — and inflammatory — set of data comes from a new study from the Network Contagion Research Institute and Rutgers University. Data previously shown to me by internet analysts suggests that pro-Palestinian posts have recently attracted dramatically more views than pro-Israel posts — a finding echoed by bot research from the Wall Street Journal.
But the really thought-provoking issue is a comparison between TikTok and Instagram. The two platforms attract a similar audience. But pro-Israel posts on Instagram are three times higher than on TikTok, adjusted for differing platform sizes, say NCRI and Rutgers. Pro-Ukraine posts are also notably higher on Instagram.
The skew is far more dramatic for topics that are sensitive inside China, such the Uyghurs, Tibet and Taiwan, and pro-Kashmir content is 600 times more prevalent on Instagram than TikTok. 「We assess a strong possibility that content on TikTok is either amplified or suppressed based on its alignment with the Chinese government,」 the report concludes.
ByteDance retorts that this 「report uses a flawed methodology to reach a pre-determined, false conclusion」 and insists it is meaningless to compare hashtags across platforms, since context varies. The imbalance around Kashmir, say, might have arisen because India has banned TikTok, but not Instagram. Similarly, the imbalance around Chinese content must be set against the fact that ByteDance』s Chinese-language platform, Douyin, is used inside China, rather than TikTok.
And with Middle East issues, TikTok stresses that it has tried to respond to community anger by removing 1.3mn hate videos and working with Jewish leaders. Insofar as there are more pro-Palestinian videos, TikTok officials say this is correlation, not causation: American youth are dramatically more pro-Palestinian than older generations.
There is some truth to this argument. What TikTok, like other social media platforms, mostly does is hold up a mirror to American society. If critics dislike that, this is partly because they recoil from what they see.
But that argument will not reassure China hawks. They insist that Beijing is using the American ideal of free expression against itself, by gaming the code that decides what content is promoted. And while it is impossible for outsiders to determine if this is true, what is clear is that some US politicians and officials want either an outright ban or the US government to have access to TikTok』s code.
I doubt that a ban will happen — the platform is so popular that this would spark a voter backlash. And ByteDance says that its 「third party trusted technology provider」 (Oracle, a US company) already has 「access to the code that drives the content」. But Congress — or the White House — could force American investors out, given that there is a wider ongoing clampdown on US investments in China and talk about buybacks.
Some senior ByteDance officials discount that prospect. Other financiers think a buyout looms. But if US investors are forced out because of political concerns, it will be another signal we live in an increasingly fractured world. Maybe some youthful investor should make a new TikTok about that — and track the views?