A woman walks past the headquarters of ByteDance, the parent company of video sharing app TikTok, in Beijing on September 16, 2020.
GREG BAKER/AFP/Getty ImagesThe U.S. said on Friday it would ban new downloads of ByteDance’s TikTok and U.S. use of Tencent’s ubiquitous WeChat app this weekend because of national security and data privacy concerns. But the bans aren’t as bad as some—including tweens hooked on the popular video app TikTok—had feared.
It’s the latest example of broad measures against China that end up not having as much bite as feared when implemented. Indeed, Anna Ashton, senior director of government affairs at the U.S.-China Business Council, described the U.S. Commerce Department’s details as being “on the conservative end of the spectrum of possibilities we anticipated, based on the vague language in the orders.”
Many investors have opted to take a watch and see approach to the flurry of proposals out of the Trump administration, with some using volatility around initial announcements about measures as a near-term buying opportunity in Chinese companies like Tencent Holdings (700. Hong Kong). While global investors are attuned to the rising tensions, many are still investing in Chinese companies where they see strong domestic growth prospects—even if that means they may be taking smaller positions than they would have if the two countries weren’t clashing.
On Friday, the Commerce Department said it will ban new downloads of both popular apps starting Sunday. Commerce Secretary Wilbur Ross said the agency would order a full ban for TikTok by Nov. 12—after the U.S. elections. The Commerce Department didn’t offer details on enforcement or potential penalties for violations of the new rules.
Continued discussions for a deal for TikTok could affect both deadlines, including the one for this weekend. And any deal still needs to get Beijing’s approval. The latest proposal, according to The Wall Street Journal, involves Oracle (ORCL) and Walmart (WMT) taking a significant stake in the company, potentially putting majority ownership in U.S. hands.
In a tweet, Adam Mosseri, who heads Instagram, cautioned that a ban “would be quite bad for Instagram, Facebook and the internet more broadly.”
The ban also applies to WeChat, potentially limiting those in the U.S. who use the ubiquitous app to interact with friends and families. But for now it spares the much larger universe of companies and others who use the app in China and the U.S. revenues account for a fraction of total sales.
Tencent though could still be in U.S. crosshairs, with other measures potentially targeting larger parts of its business. “The driving justification and concern expressed by the administration is one likely to result in additional orders or other policy actions affecting not only these companies but others as well,” Ashton said.
The Committee on Foreign Investment in the U.S. reportedly sent letters to Riot Games, which Tencent owns, as well as other videogame companies Tencent has stakes in like Epic Games inquiring about their security protocols around U.S. data. If these inquiries expand, it could apply to a range of U.S. companies given the wealth of Tencent’s stakes, which also include Reddit and Snap (SNAP).
While policy watchers expect a stream of measures aimed at China in the coming months ahead of the election, the key will be implementation. And that could take time and draw into later in the year, past the election—a reason investors’ cautious but patient approach may be the right one.
Write to Reshma Kapadia at reshma.kapadia@barrons.com
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Tweens Won’t Lose TikTok This Weekend. And Investors Are Unfazed About U.S.-China Tensions. - Barron's
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