By Joe McDonald and Zen Soo 

 

US LAWMAKERS have grilled TikTok CEO Shou Zi Chew about data security and harmful content, with some pushing to ban the popular short-video app nationwide. A Singaporean native, Chew told the lawmakers that TikTok prioritises user safety and as he sought to avert a ban by downplaying the app’s ties to China.Both Republican and Democratic representatives aggressively questioned Chew on topics including TikTok’s content moderation practices, its data security plans, and past spying on journalists. Here’s a look at some of the concerns about TikTok and its ownership. TikTok, which has over 150 million American users, is a wholly owned subsidiary of Chinese technology firm ByteDance Ltd., which appoints its executives.

ByteDance is based in Beijing but registered in the Cayman Islands, as is common for privately owned Chinese companies. Its headquarters is in Beijing’s northwestern Haidian district, home to key universities and a hub for tech startups. Founded by Chinese entrepreneur Zhang Yiming in 2012, ByteDance is said to be valued at around USD 220 billion — nearly half of its 2021 valuation of USD 400 billion. Publicly traded Chinese tech companies and privately held ones like ByteDance have plunged in value since the ruling Communist Party tightened control over the industry with anti-monopoly and data security crackdowns.

Western Governments worry Chinese authorities could force ByteDance to hand over TikTok data on American users, exposing sensitive information. China has denied asking its companies to hand over overseas data, and TikTok insists it has never done so and would not do so. ByteDance says 60 per cent of its shares are owned by non-Chinese investors such as US investment firms Carlyle Group and Kohlberg Kravis Roberts and Japan’s SoftBank Group. Employees own 20 per cent and its founders the remaining 20 per cent.

Some details of the relationship between TikTok and ByteDance remain unclear to outsiders. China’s 2017 National Intelligence Law states that “any organisation” must assist or cooperate with state intelligence work while a separate 2014 Counter-Espionage Law says “relevant organisations ... May not refuse” to collect evidence for an  investigation. Since ByteDance, which owns TikTok, is a Chinese company, it would likely have to abide by these rules if Chinese authorities asked it to turn over data. Laws and regulations are only one aspect of the Communist Party’s pervasive control. There are no legal limits on the party’s powers. The authorities also can threaten to cancel licences, conduct regulatory or tax investigations and use other penalties to compel compliance by Chinese and foreign companies operating in China. The party sometimes conveys orders using “window guidance,” or informal communication in private. It has used crackdowns to tighten control over technology companies and force them to align with its goals. The Chinese Government has also sought more direct control over companies by getting seats on boards of directors.

TikTok has promised to protect data on American users by storing them on servers operated by an outside contractor, Oracle Corp., in what’s known as “Project Texas.” Chew, the TikTok CEO, said all new US user data are stored in the United States and the company should finish deleting older US data from non-Oracle servers this year.

The fear is that ByteDance would have to hand over information it obtained from TikTok if ordered to do so by Chinese authorities, but Chew has said Project Texas will put US data out of China’s reach.

In Thursday’s hearing, lawmakers repeatedly tried to pin down Chew on whether ByteDance had links to China’s communist rulers. He deflected questions about whether staff and top executives are Communist Party members.

“I do know that the founder himself is not a member of the Communist Party, but we don’t know the political affiliation of our employees because that’s not something we ask,” Chew said. When questioned whether ByteDance was effectively controlled by the Chinese Communist Party, Chew said he disagreed. After a lawmaker said the Communist Party holds a “golden share” in ByteDance that allows it to control one ByteDance board seat, Chew said, “That’s not correct.”

In China, so-called golden shares held by official investment funds are one way for Beijing to gain more oversight over business by giving them a 1 per cent stake in companies. Chew pushed back when lawmakers claimed that the Communist Party owns shares in ByteDance that give it a vote in how the company is run. “The Communist Party doesn’t have voting rights in ByteDance,” Chew said. ByteDance’s main Chinese subsidiary is the licence-holder for some of its video and information platforms that only serve the China market.

DouYin is ByteDance’s short-video platform for the China market. It’s similar to TikTok, but its content is restricted by Chinese censorship rules that prohibit material deemed subversive or pornographic - a point emphasised by US lawmakers worried about harmful content viewed by young people. The Communist Party’s extensive Internet filters block most users in China from seeing TikTok. ByteDance has said TikTok has “no affiliation” with Beijing ByteDance Technology Co., the subsidiary that operates DouYin; Toutiao, a news and short-video platform, and other services. Most of the social media reaction in China was sympathetic to Chew, with praise for how he handled the hostile questions lobbed at him. Comments on the microblogging platforms Weibo and Douyin were critical of US lawmakers for asking Chew leading or “trap” questions. Many commenters used a Chinese saying that means “If you want to accuse someone, there’s always a way. (AP)