Sources detail tensions during the US-TikTok negotiations over the Chinese government's role and influence, including a possible veto over a future deal
ByteDance is under pressure from the U.S. to silo—or divest—TikTok's American operations, but the company also has to navigate Beijing's druthers
Context & Ripple Effects
TikTok has spent three years negotiating with Washington without resolving the core question: who controls the app's algorithms. Talks that began as sale negotiations in 2020's months-long discussions were complicated when China's AI export rules made it unclear whether TikTok's algorithms could even leave the country (export-restriction complication) — meaning Beijing has held implicit veto power over any restructuring from the start.
By January 2023, TikTok had proposed a complex $1.5B plan to reorganize its US operations, including oversight arrangements for those key algorithms, explicitly designed to win US allies short of a full sale. This report adds a harder constraint on top: sources say Beijing may demand an explicit veto over any final deal — so ByteDance must satisfy Washington's silo-or-divest demands while navigating what Beijing will accept.
First-order effects
- Any agreement TikTok reaches with CFIUS now requires parallel approval from Beijing, giving the Chinese government formal leverage inside a negotiation it previously influenced only indirectly through export rules.
- The $1.5B reorganization proposal loses value if its terms can be struck down by either capital after signing, raising execution risk for ByteDance and uncertainty for TikTok's US advertisers and staff.
Second-order effects
- If no dual-approved deal is achievable, Washington's patience narrows to divestment or ban — the path the Biden administration and CFIUS took weeks later in demanding TikTok's Chinese owners sell their stakes.
- The intertwined operations documented between ByteDance and TikTok's US business make a clean separation harder to certify, pushing reviewers toward more drastic structural remedies rather than contractual safeguards.
Third-order effects
- Chinese-owned consumer platforms whose recommendation engines sit in China are becoming subject to de facto vetoes from both governments, a structure in which no purely commercial arrangement can clear national security review.
- Algorithm ownership is consolidating as a state-level chokepoint: whoever governs the code governs the platform, echoing how export controls first turned TikTok's software into a bargaining chip back in 2020.
The trend: Cross-border technology deals involving Chinese-owned platforms are shifting from commercial negotiations to two-capital approvals, where both Washington and Beijing hold effective veto power.