TikTok is ‘caught in the middle’ as the US is ‘deeply suspicious’ of China: Analyst

BEIJING, Aug 4, 2020, CNBC. TikTok may not have a lot of intelligence value but its owner Bytedance “lives in Beijing” and its connection to the government is what worries the United States, said James Lewis from the Center for Strategic and International Studies, CNBC reported.

There’s a deep mistrust of China on in the U.S., said said Lewis, senior vice president and director of the technology policy program at the bipartisan think tank.

“The Trump administration is deeply suspicious of China. Frankly, that’s a bipartisan reaction in Washington; nobody trusts China here,” he told CNBC’s “Squawk Box” on Tuesday. “In this case, what they’ll settle for is TikTok being spun off — at least its American parts — from ByteDance, from Chinese control.”

ByteDance, TikTok’s parent company, is headquartered in Beijing. The company is considering selling off a stake of the hugely popular video app.

It comes after President Donald Trump threatened to ban the short-form video-sharing app in the U.S. due to fears the company is sharing data with the Chinese government. TikTok has repeatedly denied the allegations.

Microsoft said in a statement Sunday it will keep working with the U.S. government on a deal to acquire certain markets of TikTok — namely, the U.S., Canada, Australia and New Zealand. Talks could conclude as soon as Sept. 15, it said.

TikTok has been “caught in the middle,” said Lewis. “It’s a relatively harmless service that has an owner that raises suspicions.”

“TikTok is a largely a place where teenagers go and dance and lip sync, not a lot of intelligence value,” he said, adding that he had watched four hours of TikTok videos.

“But nobody trusts China and ByteDance lives in Beijing,” added Lewis. ″That’s the risk. It’s the connection to the Chinese government, it’s the connection to Chinese intelligence services. There’s immense amounts of information.”

Other Chinese apps could also be targeted. On Sunday, Secretary of State Mike Pompeo said Trump will announce new action “in the coming days” related to Chinese software companies that his administration views as a threat to U.S. national security.

China’s foreign ministry said it “firmly opposes” the threat.

During a scheduled press conference on Monday, foreign ministry spokesman Wang Wenbin said: “The U.S. side made this threat against relevant companies with presumption of guilt while presenting no evidence.”

“This violation of market economy rules is no ‘fairness’ and ‘freedom’ as the U.S. chants and only serves to reveal its hypocrisy and double standards,” said Wang, according to an official translation of his comments. “It also runs counter to the WTO (World Trade Organization) principles of openness, fairness, transparency and non-discrimination.”

Lewis predicted that WeChat — the messaging app of Chinese technology giant, Tencent — could be the next targeted by the Trump administration.

“The level of risk is probably higher with WeChat because there is sensitive communications than it is with TikTok,” said Lewis. “WeChat’s a great app, but where they live, who they report to creates very real risk.”

The developments surrounding TikTok demonstrates some of the risks that come from U.S.-China tensions that are an “underlooked risk” for the global economy, said Simon Baptist, global chief economist at the Economist Intelligence Unit.

“The technological bifurcation is not really about hardware or software. Technology itself will find a way to work across both domains, but the big barrier is going to be regulatory, it’s regulations that is going to drive this wedge between the U.S. and China,” Baptist told CNBC’s “Squawk Box” on Tuesday.

The barriers will drive a broader business wedge between the world’s two largest economies, contributing to business risk, he added.

“If you’re not able to combine the world’s two biggest economies in a single business model, that is going to increase business costs, it’s going to take away those economies of scale,” said Baptist. “That’s going to be a headwind for firm profits and for global growth going forward.”

— CNBC’s Yen Nee Lee and Sam Shead contributed to this report.